Monthly Archives: October 2019

171. AmazonCommercial’s Towels and Tissue (T&T) “Experiment”

A B2B Channel-Threat?

In June 2019, Amazon introduced a new B2B brand: AmazonCommercial. The first items in the line?  T&T! (For more search AmazonCommercial at AMZ).  

What’s Amazon thinking? Amazon Business has gotten traction with a “long-tail”, MRO/SKU strategy specifically aimed at huge entities. AMZ has attracted an army of resellers to curate millions of B2B SKUs. And, in parallel, AMZ has created two cloud solutions: integrations for 60+ internal procurement systems, and free, central-spend-management tools. This evolving proposition now wins up to 20% of a typical big-buyer’s MRO spend.  

AMZ’s next B2B moves? Target some bulky, big-volume, consumable, SKU? All employers do buy T&T… but how price-competitive can AMZ be? Or, conversely, how net-profitable are T&T for distributors?  

A Distributor’s T&T, Net-Profit Math

Checking with a “Jan-San” distributor who subscribes to Waypoint Analytics’ “Net-Profit Analytics” cloud-service, here’s what we found:

  1. The distributor breaks even overall on warehouse business. Direct sales account for all operating profits.  
  2. The 7000+ warehouse SKUs were sorted into 100+ product categories.
  3. Ranking the product categories by net-profits: the top 25 totaled big profits, enough to pay for 100% of all losing product groups.
  4. The biggest losing category was equipment parts. The category has an excellent margin percentage. But, the many small-dollar picks have less margin-dollar content than the fulfillment-dollar costs to yield losses. The size of both picks/orders and fulfillment costs matter.   
  5. Two of the top 5 most net-profitable categories were T&T! The categories’ low margin percentages were more than offset by large, average-dollars/pick.  
  6. No big customers have yet to negotiate with AMZ T&T prices.

Questions to Live Into:     

  1. What will Amazon invent for in-the-cloud buying tools, bulk-distribution capabilities, and/or business-model partnerships, to win more B2B spend? And, more B2B searches and clickstream data to monetize via advertising?   
  2. Why are legacy channel players blind to the net-profit/loss cross-subsidies that exist amongst both SKUs and customers?
  3. Won’t both AMZ and big-boxes introduce more private-label clone SKUs to eat into channels’ most net-profitable SKUs?
  4. Will channel players beat AMZ to inventing an in-the-cloud, channel-model for skid-quantity consumables? (I can envision such a game-changing model.) 
  5. What analytics do factories and distributors need to minimize AMZ’s takes while maximizing gains from slow-moving, traditional competitors?

For more, be in touch: bruce@merrifield.com. Waypoint clients can also attend my Nov 7th workshop. Link below.

170. Boost Your Corporate Analytics IQ

Poor ROI For Analytics Investments?

Corporate America (distributors included) is overwhelmingly NOT getting results from new analytical insights. Test your company’s Analytics IQ against:

  1. The number of analytical-dimension tools that you have
  2. The buy-In rate for new insights
  3. Your success rate at turning insights into results

The 4 Lenses: Financial + Three Service-Profit-Chain

Everybody uses financial analytics (lens 1). Distributors should also get/invent analytics for the three dimensions within the “Service Profit Chain”(SPC) (Google the term.) The SPC simplified: best quality people (lens 2) deliver service (lens 3), that yields(customer retention) profits (lens 4).  

The SPC outlines how Costco can pay (v. Sam’s/Walmart) 141% more per employee to get 157% more sales and margin dollars. And, how Costco also has legendary customer loyalty, and better sales growth – while selling at a measly margin of 13%.

These four analytical lenses each have blind spots. For example: “Inventory management” from a financial perspective stresses “Turn-and-earn” with minimal “dead and excess stock investments”. But, service-value and people-productivity lenses spotlight “fill-rates”.

Best fill-rates (tuned to a target-customer niche) from one location reduce outages which:

  1. Erode service-value
  2. Cause small-dollar, back-orders and interbranch, split-shipments
  3. These, in turn, boost transactional costs while lowering productivity and morale.

Seek the best total-economic balance!                           

And, Sell More!   

Financial thinking stresses pumping sales (and margin dollars) for economies of buying and operational fixed costs. Plus, get those fatter rebates from best-bribing vendors.   

But, service analytics asks:

  1. Grow sales from which target customers with what unique, service-value proposition? Selling commodities to all customers with standard service creates no service-value equity.  
  2. And, do all employees know the most net-profitable (potential) target-customers? And, how/why they should allocate extra service-hustle to them?       

Customer Profitability Analytics (CPA) Informs All 4 Lenses, But…

Most distributors are 110% focused on financial-belief activities. CPA reveals that some big, and many small customers, are unprofitable. Then, those who are incented on any sales/margin volume, resist. Why low buy-in for insight-plays that logically will deliver greater wins for all?  

Four Nobel Prize winners (over the past 40 years) have proven that our brains are riddled with cognitive biases. Stubborn, short-cut, data-free beliefs win over longer-term realities.    

For More on 4-Lens, Big, All-Win Gains:  

Book an initial (free) C-suite, virtual session with me (bruce@merrifield.com). And, for Waypoint Analytics clients, join me at the workshop in Phoenix on November 7th (link below).    

WayPoint Institute 2019

169. What Happened to “Total Quality Management”, etc.

Remember Back In the 70’s…

When Japanese products surpassed the quality of US goods. Then, zero-defect methods jumped to the US in the ‘80’s. (Phil Crosby’s book, “Quality is Free” was published on 1/1/80.) And, “Do It Right The First Time” became the high service-value, low cost, high morale way to go.   

Continue reading 169. What Happened to “Total Quality Management”, etc.