The Service Profit Chain
Jim Heskett et al. first published the evolving Service Profit Chain in Distribution (SPC) model in 1994. Jim and I go back to the fall of 1972 when he taught my first case study class at Harvard Business School. Next, in 1978, Jim’s research group wrote a case study (on a turnaround I did) entitled, The Small Order Problem. During 1980, he turned me on to how FedEx’s People, Service, Profits model was delivering perfect service. And, then in 1982, I adapted FedEx practices to a successful distributor turnaround.
For more on how I’ve adapted the SPC model to distributors go to Google and search for “merrifield + service profit chain”.
Continue reading 53. Best Practice: Focus and Measure the Service Profit Chain in Distribution
A monster distribution chain CEO asked for ideas to include in a regression analysis. Then, they had hired a consulting firm for $500,000 to co-identify ninety-six financial factors to correlate with branch return on assets. What Makes a Profitable Branch Profitable in Distribution?
Thinking of some of the prioritized factors in my kinetic chain model, I asked whether they had:
- One number to score the quality and years-in-place of the branch managers? (Management)
- One number for share of the number one target customer segment? (Strategy)
- The number of credits per thousand line items processed? (Systems)
- The number for gross profit dollars per full time equivalent employee? (People)
Continue reading 52. What Makes a Profitable Branch Profitable in Distribution?
There are limits to financial analysis. Financial analysis measures what’s easy to see and count in the past, and “the numbers” are all symptomatic outcomes of your controllable input decisions. So, using financial reports to be cost, asset, and cash flow efficient is smart, but you can go one step further and uncover financial blind spots with your own invented models and metrics.
Would Warren Invest in You?
Warren Buffet places big investment bets. He buys companies that have super-profitable niches, or moats, with a focused strategic effectiveness. These are companies that throw off free cash flow, have great management and a leadership that plans to protect, grow, and leverage the moats. They are also companies that have systems that will scale their moat’s strategy for growth.
How do you measure intangibles like effective strategy, management, and systems? Here’s how.
Continue reading 51. Warren Buffet’s Favorite Metrics