- Calculate sub-totals and grand totals of estimated profits for every customer by each potential, cost-to-serve transaction type:
- Direct-shipped orders
- Indirect orders (pre-sold, hits docks, then delivered):
- Warehouse-inventory supplied orders
- Will call orders.
- Service, parts, maintenance transactions
- Processing charges
And then, rank them by: profit center and sales territory
- If customers are hand coded by – industry segment1; business model strata (A, B, C, D)2; how they value service3; relative growth rate4 – then data can be loaded into Waypoint and reports can be generated that:
- Rank customers by profit within segment-strata niches
- Rank the segment-strata niches by total profits
- Customers that are “marginal” can be sorted into three piles:
- target for making profitable (#1 niche, service value buyer and growing faster than average)
- target for sending firm new (profitable-for-us) letter.
- Postpone any action for now
- Reflective questions step:
- Why are we so profitable in our top 1 to few profitable niches?
- Why are we so unprofitable in (too) many other segment-strata niches?
- What alternative, business-model competitor makes money in those niches? Why might their business model (location, mix) actually give better, situational service value to that niche?
- Within our best niche (one at a time):
- Who can we sign up as “advisors” (big, open, innovative) who will help us co-create next-level, service-value equation?
- Who are the biggest, best, fastest-growing target (gazelle) accounts that our entire team will focus on partnering?
- Who are the few biggest losers in this niche to target for “lead to gold” strategic, co-transformation calls/plans?
- Each niche can have a 5-5-5-5-5 tracking report that includes: (for more on 5-5-5 go to:http://www.merrifield.com/exhibits/Ex44555kit.pdf)
- 5 best core accounts to defend and grow;
- 5 gazelles to crack, partner and then grow you;
- 5 super-losers to gold;
- 5 fastest-growing accounts (y-o-y); and
- 5 most-down accounts (y-o-y).
- By auditing and working with “advisor” accounts, refine and start daily tracking of the Big 8+ of service metrics for each niche. Waypoint allows hand-gathered, process data to be entered securely via the net from all locations and results to be accessed by all individuals anywhere on a secure basis.
- Track and win more (very profitable) direct-ship orders for best customers due to “fast price and availability response time” (“P & A”) by short-circuiting the process at: the customer’s shop; ours; and a few key supplier’s.
- Do a customer-ranking report of only direct and indirect order profitability within each niche.
- How can we focus and excel in this niche area?
- Sort out and analyze most-profitable, warehouse-order-only customers. Who are they? How do we target more of them?
- Do a most-popular item ranking report for all of the (best) customers within a target niche and then do fill-rate improvement investing to improve all aspects of “fill-rate economics”.
- Create a list of all the most-popular-items-within-a-niche that a niche customer IS NOT BUYING. Track how well the sales force sells these potential target items by referring to article # 2.29 at www.merrifield.com. (more “old – to – old”)
- Identify new, commonly-bought items at “advisors” that can be added to round-out, the one-stop, in-stock, highest fill-rate offering that we have for the niche.
- Develop an audit scorecard system for a target niche by which to rate the customer’s total procurement effectiveness for replenishment orders. The customers with audits can be tracked to measure: further penetration and average order size metrics. (Customer replenishment systems Audit)
- Analyze how to DURR (downsize, upgrade, refocus and re-orient) the sales force which will allow:
- Best reps to call on best accounts to win 20%+ more penetration on a more total profitable basis.
- Reduce total sales force numbers and cost.
- Free up 50%+ of the accounts currently assigned to reps for which the margin potential can not support such coverage to then market in a more effective, lower-total cost way.
- Support the “high performance service excellence culture and service excellence metrics by:
- Doing regular anonymous surveys of employees on: their morale; view on management effectiveness; overall value ratings for co-workers; etc.
- Customer retention ranking reports (last month, quarter margin dollars vs. month, quarter before)
- To support the “zero error” program use:
- Credits/transaction ranking reports by customer and rep
- Log of all mis-picked items to address the environment of the most frequently mis-picked
- Spread-sheet grids for front-liners to enter daily numbers for: cycle count accuracy scores; on-time shipping and/or delivery; same day receiving; heroic acts and recoveries accomplished per day; etc.
- Database scorecards (Module 5.3-6) can then be created, tracked, rolled-up for all profit centers and used to spread best practices from one location to another.
MORE TO THE CORE PLAYS
NEXT PHASE OF REPORTING (to be developed as needed): HUMAN RESOURCE/HIGH PERFORMANCE INPUT DATA
Grade book for every corporate student
- years with company (how many are in the max. productivity window between young, inexperienced and coasting on out)
- anniversary (personal attention opportunity)
- current annual wage (rank high to low and spot the grossly over and underpaid in the line up and start a plan to rectify it, because everyone else senses the unfairness)
- last raise date (anticipate the annual anxiety/hope for raises)
- score them from 1 – 10; 1 toast; 2-3 in workout; 4 heading there; 5 steady; 6-7 active +; 8 – 9 promising tigers; 10 intrapreneurs (what’s the profit centers overall average score trend chart look like)
- monthly path report a) on time; b) effort; c) spirit; d) overall grade 1 to 10 (this replaces the annual, top-down performance review with a bottom-up, are-you-investing-in-yourself-to-grow-how-can-we-help-you exercise)
What questions does the grade book application answer or raise?
- Assuming that service excellence is a by-product of motivated people who have been with the company long enough to be highly skilled at what they do, rank the branches by:
- Average years of experience
- Annual turnover metric
- Average mastery level metric
- Motivational satisfaction score
- How high employees rate the effectiveness of the branch manager
- If great people yield great service, which then yields great economics, what is the:
- GM$/FTEE for the past 12 months trailing for the branch?
- Total employee compensation divided by GM$?
- ROCA – PBIT divided by average inventory and receivables investment?
- Composite weighted score for the “Big 8” of service excellence score?
- For compensation strategy, we want to move toward general wage transparency, in the sense that all employees have a chance to earn premium compensation for their job niche in a given metro market.
- How many have learned-and-earned their way to the maximum target compensation level for their job niche?
- Yet, we can’t grow total compensation faster than GM$/FTEE; for everyone wins comp/GM$ must also drop for premium profitability and reinvestment growth capital.
Free resource flow and bright ideas pipeline
If we ever get to the point where we dominate our target customer niches and have best critical mass inventory economics and a high pretax ROTA, then we have the enviable opportunity of deciding how to invest the excess cash that the company will be throwing off and how to redeploy the excess intrapreneurial talent and ambition. Until we are a 95%-ile performer at our core activities, we have no business getting into someone’s else’s core business with initial, beginner capabilities.
- How do we measure excess resource flows?
- How do we marry it with Innovation Management metrics that are aimed at strategic adjacencies off of our core business.
©Merrifield Consulting Group, Inc., Exhibit 56
- These are standard industry segments that all competitors tend to also use. ↩
- A= Full-service: outside-sales rep, free freight, trade credit, often special stock. B= hybrid service/terms/marketing between full-service and “C”; C= house business at list price, min.orders and unbundled service fees, esp. freight. D= wholetail, retail, cash-n-carry or web biz with credit cards with retail prices and transaction/freight fees. ↩
- Buy from friends; buy best total service value; buy pure price. ↩
- 1 to 5, 3=average; 5 will innovative gazelle 2-5x industry average; 4 = “better than”; 1= dying ↩