Monthly Archives: November 2017

81. Find (and Fill) Your Cross-Subsidy Fault Lines

Want to expose the ways you in which you can beat Amazon (AMZ)? Start with a line item cost-to-serve model for your distribution company or for several of your most innovative distributors. Then, create profit and loss rankings for every SKU and vendor, as well as for customers, territories and niches. Get ready for some shocking revelations. The biggest: big profit/loss cross-subsidies fault lines likely exist between your most profitable and unprofitable customers and SKUs.

The most profitable warehouse items:

  • Are popular (highly picked) commodities
  • Have high-dollar sales per pick averages
  • Have margin percentages that seem low but gross profit dollars (GP$s) per pick that exceed the cost to serve dollars (CTS$s), yielding the highest profit dollars (P$s)

Another way to think of this is using the Profit Equation: GP$s (-) CTS$s = P$s.     Continue reading 81. Find (and Fill) Your Cross-Subsidy Fault Lines

80. Using Dumb Stuff to Boost Your Profits

Richard Thaler, author of Nudge, recently won the 2017 Nobel Prize in economics. He’s been uncovering and popularizing cognitive biases in his study of behavioral economics for over 30 years. Thaler studies the human behaviors that don’t fit rational economic expectations, or the dumb stuff people do.

Do you know your firm’s number one dumb, unprofitable activity?

You too can use the study of dumb stuff to your advantage. First, have your C-suite independently, and perhaps anonymously, write down their top three dumb profit draining activities within the company. What’s the consensus? Which activity is the number one dumb activity?  Continue reading 80. Using Dumb Stuff to Boost Your Profits