UNDER-VALUED RUSTY: RIP
Daniel Joseph (Rusty) Staub passed on March 29th at 73. Rusty (Le Grand Orange) played 23 years in baseball’s major leagues retiring in ‘85. His career stats: batted in 1,466 runs; averaged .276 with 292 homers and 2,716 hits; and walked a spectacular 1,255 times. With walks, his career on-base percentage (OBP) was .362. He didn’t swing at bad pitches.
Rusty, a champ admired on and off the field, did not make the Hall of Fame. Baseball beliefs back then were still blind to the value of Walks. In 2000, the same Analytical Ignorance allowed the Oakland A’s to “buy runs to win games” cheap. They snagged free agents with superficial flaws, but high OBPs. (Well told in Moneyball: both the book and movie). Continue reading 95. Rusty Staub and Your Unequal, Margin Dollars
AMAZON’S SMALL-DOLLAR-ITEMS: Math and Solutions
Amazon knows warehouse activity costs to the penny. Their 9th generation warehouses may have the lowest, cost-per-pick on the planet. Some stats:
- The “click to ship” elapsed time is 15 minutes and dropping.
- The average human time input for each order is one minute which includes 15 seconds to pack.
- The cost per pick – in the narrowest sense – is 44 cents for a human and 20 cents for a robot.
Continue reading 94. Amazon’s $7 Per Line-Item, Wake-Up Call
Imagine a distributor that has 10 outside Reps making 4.5 calls per day at an all-in cost per call exceeding $100. They must believe that the costs of these rep calls are worth the benefits. So, what cluster of beliefs guides those daily bets that add up to over $4500?
What beliefs lie behind your rep call cost bets?
Here are two belief clusters that serve as poles on a continuum. Where do your beliefs fall?
We’re supply-chain value creators
- All our reps are certifiably excellent at knowing which are the highest net-profit potential accounts
- All our reps plan and proactively pitch (with team help) the best, win-win solutions to these accounts that deliver a one-stop shop array of SKUs throughout a customer’s business and are executed with perfect, basic service metrics tuned to the customer’s needs
- These solutions lower the total procurement cost of the customer’s replenishment process, while boosting their uptime productivity using our goods and lowering our cost-to-serve expense as a percent of sales
- We also take care of all (new) product knowledge needs customers may have
- Our goal is to secure a bigger, win-win share of spend, if not a 100% partnership
- When we partner with the best growing customers, they grow us
- Our sales (and rebates) grow faster than industry averages due to customer-centric, service-value innovations for replenishment of commodities (which now comprise 90% of our sales)
We maximize “relationship value” to get economies of sales
- Our “good” reps make just-in-case, regular calls to befriend customers and react to their needs (often economic concession demands)
- More reps secure more active accounts
- Our goals are to push products to more accounts to grow sales, margin dollars and rebates.
- With all operational costs (seemingly) fixed in the moment, incremental GP-dollars will flow increasingly to the bottom line. These profits will hopefully grow faster than sales. (But, they haven’t!)
Relationship beliefs stopped working long ago
Financial survey data shows years of low returns for 90% of distributor participants. Isn’t it time to update your beliefs and analytics to improve your odds for better returns on your rep-call bets?
Business is like poker. You can’t have perfect information or consistent good luck. The winners are statistically a few percent better at deciding when to fold or hold; and at winning the hands they play.
Focus your best people-talent bets on creating more value for your biggest net-profit growth potential customers. Customer/SKU profitability analytics will upgrade your beliefs and improve your betting odds.
How? Contact me for a free, desktop session.
Most distributors have analytics software, but few get needle-moving results. So, what’s missing?
A case study’s best practices
A recent Harvard Business Review blog reported on a company that took their analytics seriously. Here’s what they did:
- Created a separate analytics business unit that reported to the C-suite
- Staffed the new business unit with young, ambitious people from outside the industry
- Charged the team with achieving at least a 10X ROI for the unit’s budget cost
- Targeted customer-centric results for the operating companies
- Trained the operating companies to take over and improve upon the new initiatives
- Incented both the analytics and operating folks with the same profit increases
The first year the new unit hit 46X their budget. Now, with all the operating companies begging for the no-charge analytics help, the unit hit 106X in year two and 200X in year three. Continue reading 89. Get an Outrageous ROI from Analytics
How do you measurably increase a customer’s value, keep and win a larger share of their business, and improve the net profitability of the account? A first step should be to purge the bad habits underlying high credit activity customers and rid your company of unnecessary credit costs in distribution.
Continue reading 60. Opportunity: Be Rid of Large, Unnecessary Credit Costs in Distribution