Case Study: Office Depot - Price Matrix

Background

Office Depot, Inc. is a global supplier of office products and services with a turnover of $US 15.5 billion in 2007. In the UK, Office Depot operates both the Office Depot and Viking Direct brands and offers the market place a mix of office products, office furniture and print management services.

Cordis has serviced the UK Print Management division of Office Depot for some 5 years providing bespoke FileMaker development and consultancy.

Solution Overview

One solution developed by Cordis for Office Depot is known as the Matrix Pricing Tool. The purpose of this tool is to provide instant pricing for a given print product (eg letterhead) from a range of contracted suppliers.

In order to do this, the tool stores a matrix of cost rates provided by Office Depot suppliers on every aspect of production ranging from cost of paper, to different finishing items (eg binding, guillotining etc) to delivery. In fact, each supplier who participates in the system contributes up to 1000 individual pricing elements in order to provide the data required to generate pricing.

In order to achieve a very high level of accuracy, the tool calculates precisely the number of sheets required, the exact units of various finishing elements required, the finished weight of the product for delivery purposes and various sizing elements.

Why?

The driver for development of the system was two-fold. Firstly, Office Depot wanted the ability to provide its customers with a much more response quoting service - so when a customer asks Office Depot for a price, they want to be able to provide it in minutes and hours, not days. Secondly, suppliers to Office Depot were finding that a signficant amount of time was being used in providing quotations for small and very similar requests.

If you consider that Office Depot frequently makes in excess of 100 quote requests in a day, and the requests are given to approximately 30 suppliers and for each of those suppliers, a quote takes approximately 10 minutes to complete, then it works out to approximately 500 hours cumulative time across those suppliers in day. Or, another way of looking at it is 16 hours per supplier - ie a little over 2 full time employees.

User Scenario

For each of the approximately 35 Office Depot Customer Service Representatives (CSR), the process to use the system is incredibly simple.

1. Firstly, the CSR completes the product specification indicating the type of printing required (eg Full Colour), the type of paper required (eg Gloss), and any finishing required, eg (Guillotining). A given product could include multiple finishing elements, multiple paper options, and indeed the product could be multiple pages long (eg a book).
2. The second step in the process is to complete the Request for Quotation (RFQ). In this step, the CSR simply indicates what quantities pricing is required for.
3. Finally, after submitting the request, the Matrix Pricing tool will apply the product configuration against all of the pricing matrixes in the system, and where a match is found, will return the price for the given supplier. The system will continue this matching process for every quantity requested from every supplier.

In some instances, such as tender activity where Office Depot may require pricing for several hundred products, the system will automatically provide pricing from all matching suppliers for those several hundred products.