Tag Archives: Supply Chain Math

9. Special Stocked Items Are Mostly Net-Profit Losers A Dream Request (?)

A big customer asks you to special stock some odd items which they currently purchase direct. You say “YES!” believing what??

All Gross-Margin dollars (GM$s) are good for both company and rep commissions. One-stop-shopping will add GM$s to orders and lock in the customer. The now-more-loyal customer won’t check prices regularly on commodity items. ┬áBut, if they do, you will get last-look to meet prices on the commodities.

And the Customer is Thinking….(?)

Consolidating suppliers consolidates “procurement costs”, including Purchase Order (PO) activity costs. The bottom 20% of POs (ranked by dollars) total about 1% of the spending. If a PO costs $80, then converting 100 POs to extra line-items from a distributor will save roughly $8,000.

What’s the Net-Profit Truth?

Waypoint Analytics’ clients can run a report on “special stock” customers. The report totals the profitability of all items that only that customer bought (de facto special stock), then adds the profitability on items bought by more than one customer (the commodities) with a grand total.
Continue reading 9. Special Stocked Items Are Mostly Net-Profit Losers A Dream Request (?)