Deferring a geographic expansion

Industrial distributor

The company was considering an additional site in Ontario, with a new logistics setup.

Approach

1. 01

   Frame

   The question was whether to commit $300,000 CAD to the expansion. A validation phase of $18,000 was included in that amount; the rest remained conditional on its results.

2. 02

   Investigate

   The file brought together existing purchases, transport costs and conversations with 25 buyers in Ontario. Several were interested in the products, but few could name an order that could be switched over quickly.

3. 03

   Explain

   Two obstacles were examined: low brand awareness, or purchasing relationships that are hard to move. The interviews mainly showed that the suppliers already in place were meeting urgent needs.

4. 04

   Build

   We compared an Ontario warehouse, remote sales from Quebec and the development of accounts in Quebec, using the current service level as the benchmark.

5. 05

   Test

   An offer was made to 60 identified buyers over eight weeks. The thresholds were ten paid orders from at least eight organizations, with deliveries in under four days. The test produced four orders from three organizations.

6. 06

   Decide

   Management dropped the Ontario site and kept only a remote service for incoming requests. The market’s theoretical potential did not offset the weak buying signal.

7. 07

   Steer

   Six months later, the three accounts were still ordering, but volume remained below the level that would justify a warehouse. The project will be reviewed if orders grow steadily.