One might not expect Goodwill to be in the car detailing and mattress reconstruction business.
That’s because Goodwill has what may seem like a straightforward business model – accept donated items, sell them and use the funds to pay for job placement, training and other community-based programs.In fact, there is a great deal of complexity in how Goodwill centers operate and for Goodwill of Silicon Valley(opens in new tab), with some of the highest housing costs in the country, a number of factors have combined to make dealing with that complexity vital to survival.
“One of the concerns I have with Goodwill is that commodity prices have gone down while the minimum wage has gone up,” creating lower prices for goods and higher costs, said Christopher Baker, CFO of Goodwill of Silicon Valley. “There is a tsunami coming for Goodwill. The only way to get through this is optimizing our business.”
Ridding Complexity to Stave off Catastrophe
That’s no easy task because, like many other Goodwill branches, Goodwill of Silicon Valley is a complex operation. It runs 18 different stores plus a boutique store, an ecommerce site (thriftonic.com), 20 donations sites, after market salvage, car detailing and, until recently, mattress reconstruction.
Moreover, dealing with donations adds complexity most retailers don’t need to deal with.
“Donated goods area is a different beast,” Baker said. “We have a good-better-best pricing system. In the donated goods business, we deal with 12 million items per year. Each is unique.”
Goodwill of Silicon Valley also tracks who sorted each item and how long items are kept on the shelves. Each item has a four-week rotation where it continues to get discounted and eventually pulled off the shelves and sold in bulk, which is treated differently, sold per pound. Properly tracking what’s sold to salvage can make a huge difference to the bottom line.
“It’s a complex organization in how we generate invoices and manage the separate businesses,” Baker said. “We were doing that with a lot of software. I was using an outside consultant [to help manage it]. He’s a bright guy but I was beginning to wonder who the customer was.”
Leaning on a Technology Background
Baker, who previously worked in technology, and the rest of management at Goodwill of Silicon Valley recognized that for the organization to continue to survive it needed to better manage all of its information and the existing processes. It was running Microsoft Dynamics GP for ERP and RMS for point of sale (POS).
“We had a lot of software, but I still needed a lot more from a CRM and planning perspective,” Baker said. “The cost of doing this and integrating all these platforms together didn’t make sense.”
It deployed NetSuite to manage ERP, including multiple subsidiaries, inventory management(opens in new tab), CRM, omnichannel POS, procure-to-pay(opens in new tab) and is using the NetSuite Bronto commerce marketing tool. NetSuite was able to handle all of Goodwill’s complexity. The organization was flexible about adopting some of the best practices NetSuite has learned over its many years and was able to customize the system to its needs in others, Baker said. Notably, Goodwill of Silicon Valley created a customized bill of lading packing ticket that employees can simply hand over to drivers making a pick up, creating significant time savings in manual entries. In fact, simplifying processes for the workforce was another critical point.
“We have over 100 percent turnover,” Baker said, noting that many employees take positions at Goodwill to help get back on their feet. “We want to place people in meaningful employment going forward. It was critical to have simple tasks and limit forms.”
Already NetSuite is paying dividends. New product gross margins went from 39 percent to 47 percent, which accounts for roughly $100,000 to the bottom line, while gross margins on salvage grew from 50 to 54 percent. The visibility into inventory and finances has also allowed Baker to take a more hands-on approach.
“Each week, I can go and see if there’s a large variance in the store even into the item that’s missing,” he said. “I can send an email to store managers each week. They know we’re watching them now.”
The result is an organization well positioned to weather the coming tsunami.
Watch this short video to see the impact Goodwill of Silicon Valley is making in its community.