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. But, 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.
Special stock items that are bought frequently in a large quantity are usually net-profitable. Most small-dollar/pick, odd items are losers. The number of special stock items is always a shock. And, the commodity items are often breakeven or losers too! (last-look match effect?) Clever customers are getting both PO savings and price-savings on the commodities! (Because distributors buy odd, special-stock items from master wholesalers, the master wholesalers, in total, are net-profit losing suppliers.)
How to Cure Special-Stock Item Losses?
Flowchart the approximate, before-and-after, cost gains and losses to discuss. Is there true net cost-savings? If so is it being shared fairly? Or, is the customer getting 150% with a negative-50% share for you?
Be better negotiators with Waypoint supply-chain math. Pay your reps an incentive based on the net-profit of accounts. Give them deep-dive, Line-Item Profit Analytics for each customer. Find and rectify the existing unfair savings/cost splits. Prevent future bad deals. And, discover other, hidden buying inefficiencies in most every customer relationship. Share these findings with customers to convert hidden activity costs for both parties into win-win savings! A better buy-sell, replenishment process will win more share of the accounts!
Why not get supply-chain-math effective? Request a Waypoint demo (waypointanalytics.net). And, attend the next APIC Conference in Phoenix (www.ApicConference.com) to meet distributors already winning with Net-Profit Analytics.