DRS Deals In Retailing Woes

Diversified Retail Solutions isn’t looking for a long-term commitment.

The senior management advisory firm helps companies troubleshoot problems, then execute solutions.

“Our goal is to work ourselves out of clients,” said Jimmy Wright, founding partner of the Bentonville firm.

DRS helps retailers and consumer product companies improve, whether that need is in merchandising, marketing, distribution or human resources. It’s clients include everybody from Procter & Gamble to Montana Tractors.

Wright said DRS is not a consulting firm but rather an advisory firm that specializes in knowledge transfer.

“We focus on knowledge-transfer, meaning first, every company is different, so there is no set solution,” Wright said. “You have to be able to assess the company, its culture, its competition and provide solutions for their issues … You have to teach the basics of why. I refer to it as curiosity teaching.”

By making a client self-sufficient, DRS spends less time on-site than traditional consulting services, which costs the client less in the long run.

Diversified Background

The 27-person firm, which was established in 1997, has grown from about $100,000 in sales in its first five months of billings to an average of about $5 million in sales annually.

The firm has solved the problems of more than 250 businesses worldwide. About 35 percent of DRS’ client base is international.

“Our goal is to get back home,” Wright said. “If we have a potential client that we feel isn’t serious about change, we don’t do business with them because we don’t want them to waste money or time.”

Lolan Mackey, a partner, said the firm’s business is essentially referral based.

Some problems take weeks to solve. Others take years.

Besides the office manager, there are no employees at DRS, only partners who act as independent contractors. Some are retired and work about six weeks per year. Other founding partners, like Wright and Mackey, might travel four of five days per week.

DRS was working on problems for companies in Canada and Costa Rica when the Business Journal interviewed them in mid-January. A Costa Rican beverage company was in town the week before that talking about its juice and sports-drink products.

Both Wright and Mackey previously worked at the home office of Wal-Mart Stores Inc., where Mackey spent more than 25 years and Wright spent 14. But Wal-Mart isn’t the only thing on this firm’s resume.

“I would argue that Wal-Mart learned a lot from us,” Wright said.

Mackey said after he retired from Wal-Mart, other small to mid-sized retail-focused companies tried to recruit him and others now at DRS. Mackey was a former vice president of store operations in the international division of Wal-Mart.

“We did not want to get back into that corporate life again,” Mackey said. “We got together and said if there are that many companies wanting help, maybe we can do it more as coaches or advisers.”

Before joining DRS in 1998, Wright served as chief logistics officer of Amazon.com. Other partners have worked for Home Depot, Walt Disney Co., Sara Lee Foods, Arthur Andersen, Kmart Inc. and Goldman Sachs & Co.

“That’s why we call ourselves diversified, because we are diversified on how we approach a business,” Mackey said of the collective experience.

Wright said DRS’ focus has nothing to do with Wal-Mart.

“It is very successful for [Wal-Mart], but their methodology is unique to their company, and what we assist clients with is developing unique processes for that company,” Wright said. “We do not have a standard solution set.”

DRS’ list of clients includes Procter & Gamble, Best Buy, Sprint PCS, Toys “R” Us and Safeway Stores.

But it also has helped smaller companies such as Montana Tractors of Springdale.

Montana hired DRS in March to help with its logistics department.

Rodney Miller, CEO of Montana Tractors, said DRS ended up saving them $1 million in logistics costs. Montana opened for business in May 2004.

“As with any consultants, there is always a fear that you won’t get savings back,” Miller said. “[DRS] immediately showed you where the savings would be, and it was in black and white.”

Miller said DRS worked with Montana for six months. DRS put together a timeline, wrote job descriptions and consequently hired for two positions in the logistics department.

DRS also took bids from trucking carriers for Montana’s more than 275 shipping lanes.

Miller said DRS let the carriers know Montana’s expectations, and in the end, the bids came in lower than Miller expected.

Before, the logistics department was a loss for Montana. Miller said now the department is responsible for generating revenue, or at least breaking even.

Ted Wade, who still retains his partner status with DRS, said instead DRS was able to optimize Montana’s supply chain by changing its shipping.

“Instead of shipping things ad hoc, you coordinate them so you better utilize the equipment purchased and lessen your operating cost,” Wade said.

Wade joined DRS in 2002 after retiring from his position as vice president of corporate traffic for Wal-Mart Stores. He worked for J.B. Hunt Transport Services Inc. before his time at Wal-Mart.

Wade said retired executives often choose consulting engagements because they can offer companies immediate knowledge, in addition to a breadth of contacts established over the years spent in business.

“Because those relationships are built and respected, they can bring the company help very quickly,” Wade said.

“We not only have a great logistics person now, but we have a department set up properly that runs properly,” Miller said.

Method

Wright said the firm applies a methodology to client issues that it developed in its first four years of business called the “4 Ds.”

Discovery, definition, design and delivery make up the components of the “4 Ds,” in which the clients’ problems are discovered, then the financial impact is discussed and finally a battle plan is put into place.

“You have to teach the why as much as the what, otherwise people will not continue to do the what because they have no base of understanding as to why they are doing it in the first place,” Wright said.

Both Mackey and Wright said the goal of DRS is to make the client self-sufficient.

And they are cheaper to hire than a traditional consulting firm, Mackey said.

For example, if a client were to hire a consulting firm, the traditional business model requires 15 to 19 people to get the job finished.

DRS can get the job done with three people, Wright said.

“Generally, the traditional consulting model could cost the client $25,000 per day,” Wright said.

Hiring DRS is about 25 percent of the cost of a traditional consulting firm, because it charges less, and the cost per person is less, he said.

“We don’t need anyone to assist us in doing PowerPoint presentations and do our homework,” Wright said. “We are both great typists.”

Wright said DRS is able to charge less because it operates on 75 percent less profit margin than traditional consulting firms.

Larger Landslides

Without naming names, DRS was able to help a $12 billion company in two years to lower its selling, general and administrative expenses 4 percent, from 22.5 to 18.5 percent.

“That’s in excess of $400 million per year in savings,” Wright said.

The company’s problems varied from store operations to administrative issues.

“It involved changes in process, people and product,” Wright said.

Another example was a South American grocery chain that Mackey advised. He spent three weeks working late every night at one store that DRS made into an operating model.

Mackey said DRS took that one store — which had decreasing sales, profit and number of customers — and changed its layout, merchandise and signage.

With DRS’ new policies and procedures, the store became the No. 1 operating store in comparable-store sales for the grocery chain, with about a 20 percent average increase in sales year over year and a 2 percent to 3 percent increase in profitability.