Monthly Archives: October 2015

9. Special Stocked Items Are Mostly Net-Profit Losers A Dream Request (?)

A big customer asks you to special stock some odd items which they currently purchase direct. You say “YES!” believing what??

All Gross-Margin dollars (GM$s) are good for both company and rep commissions. One-stop-shopping will add GM$s to orders and lock in the customer. The now-more-loyal customer won’t check prices regularly on commodity items.  But, if they do, you will get last-look to meet prices on the commodities.

And the Customer is Thinking….(?)

Consolidating suppliers consolidates “procurement costs”, including Purchase Order (PO) activity costs. The bottom 20% of POs (ranked by dollars) total about 1% of the spending. If a PO costs $80, then converting 100 POs to extra line-items from a distributor will save roughly $8,000.

What’s the Net-Profit Truth?

Waypoint Analytics’ clients can run a report on “special stock” customers. The report totals the profitability of all items that only that customer bought (de facto special stock), then adds the profitability on items bought by more than one customer (the commodities) with a grand total.
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8. Your Financial Management Style Needs More Clothes

In the early ’70s, distribution trade associations started offering Financial Survey Reports to participating members. Back then, “financial management” was KING.  You wanted to achieve the financial averages of the “Top Quartile” performers (even though those averages blended different strategy outcomes and the top 5% – true innovators – dragged up the average for the next 20%).

The reports evolved. New ratios like – GMROI, Turn-Earn, Personnel Productivity Ratio (PPR), etc. – all had their moments of fame. Analytics software packages started arriving in the ‘90s to slice, dice and graph “the numbers”.  Because financial numbers and their derivatives are downstream symptoms of upstream, hidden, root causes for profitability, interesting data was not actionable for sustainable success.

Continue reading 8. Your Financial Management Style Needs More Clothes