This is one of the first insights that distributors who subscribe to Line-Item Profit Analytics are shocked to find out. Analytics reveal that:
- Naturally high-margin percent SKUs and customers are mostly net-profit dollar losers
- Gross profit dollars on small-dollar lines and orders are less than their cost-to-serve dollars
You can’t ignore small transaction size, or the variable service-people costs for customers with bill-me-later, paper-based trade credit. Continue reading 101. High-Margin Counter Sales Aren’t Profitable!
An industrial buyer asks a distributor CEO a question.
BUYER: “Can you beat my last year spend on 20 MRO SKUs? The grand total was $35K.”
CEO: “Well, it depends upon the average dollar size of your orders. We can do simulations with my OptiQuote calculator. The general rule is that prices drop with fewer, bigger orders. We pass the reduction in our line and order fulfillment activity costs on to you. And, on any given order prices will drop at both the line-item level and order-total level as the dollar totals increase. As a best-theoretical case, we could enter the annual SKU totals on one big order.” Continue reading 101. Case Study: Customer Names Price, OptiQuote Calculator Sets Terms