Bouska returned to Munich determined to stay where he was. "I had lost my country, everything that people consider home," he says. "All of that was gone, but I had rebuilt part of it in Germany."
But his thoughts returned again and again in the next few weeks to Rysavy and his struggle to build a company in America. On a weekend trip to the Alps, Bouska couldn't get his friend out of his mind. In 1988, with the Communists still in control of Czechoslovakia, Bouska could expect to be arrested if he returned home. But a reunion in America with a close friend with whom he had played on the streets of Prague? It tantalized him.
"That Sunday," says Bouska, "I called Jirka and said, 'I'm coming."
* * *
Bouska's software system was already in place when Rysavy made his pitch to buy Trick & Murray, in 1992. So, too, was a merchandising plan that enabled Rysavy's company to bypass the wholesaler middlemen and instead purchase office supplies directly from manufacturers.
Rysavy described to the Trick & Murray executives a strategy that was producing dramatic results. From $1 million in losses in 1988, the NBI operation was on its way to 10% operating margins. And it was enjoying much greater productivity: whereas it once took 340 employees to produce $20 million in sales, Rysavy's NBI acquisition by 1995 would employ 180 people producing sales of $65 million. In addition, by 1995 the operations would require half the inventory to support more than three times the sales.
Rysavy completed the acquisition of Trick & Murray in the summer of 1992. He merged the company into two others he had acquired in the Seattle area. Eight of the nine former principals stayed on to run the combined operation, with Ted Nark taking the top job as president of the company's western region.
As he had done elsewhere, Rysavy pruned the Seattle operation both to remove withered branches and to expose the main trunk that held everything together. "We focused," says Nark, "on being the best supplier of office products to corporations." Snipped away were five retail stores as well as some services, such as the printing of business cards and letterhead. Gone, too, were redundant facilities. Rysavy also centralized many administrative responsibilities; for example, accounting functions previously done separately at the three different companies moved to headquarters in the Denver area.
By centralizing functions and eliminating redundant facilities, Corporate Express has improved operating margins by as much as 6%, according to Alex. Brown's analyst Chris Vroom. Such efficiencies are fairly common in corporate mergers across the broad landscape of American business, of course. For Rysavy, however, the most significant changes -- worth an additional 5% or so in improved operating margins -- went well beyond the standard fare. In fact, changes in the merchandising plan and in the computer system effected a complete metamorphosis of the Seattle operation.
Most office-supply companies, including Trick & Murray before it was merged into Corporate Express, give customers a catalog of 15,000 to 25,000 items from which to order. That requires the supplier to maintain a broad inventory, which is costly both because of that inventory's size and because it moves slowly. (The industry standard turnover is about four to eight times a year.) Because most suppliers are small, few of them have the scale to buy much more than half their items directly from manufacturers. Most of their inventory comes from wholesalers, who pass along a hefty markup.
Rysavy brought a far more focused merchandising strategy to the Seattle operation. What the company calls its "in-stock catalog" lists about 5,000 items, not the traditional 25,000. Customers can get everything they need, but the variety within any category is somewhat circumscribed -- perhaps the staplers do not come in emerald green, or you can't get them from every manufacturer that makes them. If a customer asks for a product that Corporate Express does not carry, the company's computer system automatically suggests a suitable alternative from the in-stock catalog. As a last resort, customers can still order from a larger, more traditional catalog, but the prices for those items typically run higher because the company obtains them from wholesalers. About 85% of Corporate Express's sales come from its in-stock catalog.
Many good things flow from that focused strategy. Corporate Express generates huge sales volumes from just 5,000 products, enabling it to negotiate bulk purchases directly from the manufacturers. According to Vroom, the company thereby gains about a 10% cost advantage -- even after passing savings on to customers -- against competitors who must buy primarily from wholesalers. With higher fill rates and lower prices than those of competitors, Corporate Express has grown not just through acquisitions but through double-digit increases in sales.
Corporate Express also gains several big advantages in its inventory. With most orders coming from its in-stock catalog, the company is able to deliver about 99% of all orders by the next business day, a percentage that's far higher than the industry norm and a key element in satisfying customers. At many companies, says Rysavy, "salespeople have to call customers and explain why the order isn't being filled quickly. That adds lots to costs, and it's a frustration for customers."
Rysavy's inventory doesn't stick around long. High volume on fewer products means faster inventory turnover. After it took over Trick & Murray, Corporate Express increased inventory turns from about 8 a year to 16. That produces fireworks on the bottom line: with inventory leaving the warehouse in about 23 days but Corporate Express paying for it in 40, the manufacturers finance not only the inventory but also much of the warehouse operations.
If Rysavy created the merchandising strategy, it was Pavel Bouska who brought the computer system to life. The system confers on Corporate Express a major advantage in the marketplace. Bo Cheadle, a senior analyst with Montgomery Securities, calls the company's inventory-control system the best in the industry. Why is that so important? "The items we sell are tiny in dollar value," says Bouska. "So we can't spend much money processing an order."
Customers can order office products by traditional means -- by phone or by fax -- or through an on-line hookup with the company. In every instance, a computer checks the items in the order against the inventory in the warehouse. If the items are in inventory, as they usually are, the order goes electronically to the warehouse, indicating to employees the location of each item. Another copy moves electronically to the billing department. If any item is not in stock, the system automatically checks the on-line catalogs of two wholesalers, choosing the one with the lowest price. The wholesaler usually delivers the item to Corporate Express the same day.
