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?
- 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.
- Request my free “Core Customer Renewal Roadmap”.
- Schedule a C-suite virtual session with me for a demo on the analytics and plays. (firstname.lastname@example.org)
Or, Plan B? Hire flakes for less and hurt service quality and morale. =this._