Many distributors assume that they can handle one more warehouse order for free. Aren’t – all warehouse operational-costs fixed in the moment? And, isn’t – keeping people busier good? Alas, no! Let’s look at the cold statistics for a contractor-supply distributor’s monster, Central Distribution Center (CDC).
Lessons from Bad Polling Forecasts
Massive money was spent on polls and flipping Republican senate seats. Alas, no Blue Wave happened. Key lessons:
- Models – based on past results for a complex, ever-changing system – don’t accurately predict the future.
- Money wasted on “dumb bets” (like the $300MM democrats spent trying to flip 5 Republican senate seats unsuccessfully) can’t also be invested into smarter risks.
- If you want to get rich, you must have vital information – about stable systems – that no one else has and upon which you can act.
QPQ For The Good
Politics is giving QPQ a bad reputation. But, “this for that” can also be a selling tool for turning win-lose customer requests into win-win outcomes.
Distributor reps can use QPQ for transactional fairness.
“Mr. Customer: you want a lower price? Understandable! How can we turn a – you win, I lose event – into a win-win transaction? Perhaps a bigger order or the promise of greater future purchases?”
Valuations for WeWork, Uber, Blue Apron, etc. have been tanking. They all prove that a company’s business service-cost model can’t spend more costs on a unit of activity than the unit’s margin-dollar content, and then make it up on volume.
The same economic reality hit many retail dotcoms back in 2000. Remember eToys? In ’99, they were averaging $20 in margin per order while spending an all-in cost of $300 per order for fulfillment.Continue reading 175. Melting-Unicorn Wisdom for Distributors
“Data-Driven Decision-Making” vs. HiPPO Wisdom
When decisions are made at Amazon, “the best data and innovation metrics” win. No hearsay, golden-gut, follow the herd, or political self-interest beliefs. The HiPPO (Highest Paid Person Opinion) in the room doesn’t win with suck-ups bobbling in agreement. Continue reading 174. Doctors Prescribe: “Evidenced-Based Management”
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:
- The number of analytical-dimension tools that you have
- The buy-In rate for new insights
- 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:
- Erode service-value
- Cause small-dollar, back-orders and interbranch, split-shipments
- 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:
- 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.
- 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 (email@example.com). And, for Waypoint Analytics clients, join me at the workshop in Phoenix on November 7th (link below).