142. Hiring Hourly People Solutions

Concierge Customer Service, Core Renewal, Cost-to-Serve Math, Index, Line Item Profit Analytics, Profit Analytics, Service Value Innovation Guidelines, Supply Chain Partners, WayPoint Analytics

Distributor Case Problem (3/14/18)

A distributor needs to hire six hourly people across four locations. But:

“We can’t find acceptable candidates for our normal starting wage. We don’t want to hire new people at a higher rate than our veterans. And, we don’t want to hire flakes who can’t pass our drug test. What do we do?”

Will This Problem Get Worse? $15/Hour (Minimum) Wage Has Traction

Costco, Amazon, Target, Walmart, etc. have all announced hourly wage boosts (typically) to $15 per hour over the past year. On the minimum wage front: California was the first state to hike the minimum hourly-wage to $15 in 2016. Now others: MA, NY, DC and IL. And, the Democratic US House is moving towards a $15 national minimum wage law.  

Costco’s wage announcement (along with record earnings) didn’t detail their over $20/hour-in-total comp which includes health benefits, etc.  How do they sell commodities at a 13% margin and yet afford high pay?  

Easy! Costco’s gross-margin-dollars per square foot and per employee is 157% of Walmart/Sam’s due to flexible service systems (working smarter!). Costco’s service value/productivity strategy is to:

  • Pay the most
  • Get, keep and cross-train the best caliber people
  • Those people then enable best service value solutions.  

Costco beats Walmart on every metric with 1/8th of WMT’s “buying power”. And, Costco is a most popular retailer in the US.

Case Study Recommendations  

Consolidate empty-margin-dollar activity:   

  • Picking-stats reveal that branches keep re-ordering some SKUs repeatedly in small-dollar picks. Ship each branch a case of those SKUs. Eliminate scads of small-dollar busy-ness for all locations.  
  • Each location averages getting 5% of the margin dollars from 50% of their smallest customers on 20%+ of the total invoices. The worst fifth of the 50% pool have the most activity with miniscule margin dollar totals. Change terms for them to incent order consolidation or defection.

The goal: get transactional activity down to a level that requires no new people.  And, then pursue Costco’s high-performance service economics that will serve all stakeholder groups.

How to Boot-Strap Your Way To Costco Numbers?   

Three aids:

  1. Every distributor needs customer net-profitability ranking reports with SKU, line-item detail. This new-world of analytics provides insights that lead to new plays for high-performance service results.
  2. Request my free “Core Customer Renewal Roadmap”.
  3. Schedule a C-suite virtual session with me for a demo on the analytics and plays. (bruce@merrifield.com)  

Or, Plan B? Hire flakes for less and hurt service quality and morale.    =this._