Processing customer orders perfectly is less expensive than making mistakes. More realistically, reducing errors saves operational expenses, increases service value to customers, and boosts morale due to the absence of angry customers. Think: Systematically reduce errors with Zero-Error Analytics in Distribution. Continue reading 55. Zero-Error Analytics in Distribution
Category Archives: Distribution Strategy
54. Innovation Metrics Recap
The first distributor association financial surveys debuted over 40 years ago and mostly highlight data that lenders and tax authorities want audited. Now, it’s clear that these numbers show the downstream symptoms rather than the upstream root causes of profits or losses. Also, the causes often remain unknown and unmeasured by at least 90% of distributor survey participants. Continue reading 54. Innovation Metrics Recap
53. Best Practice: Focus and Measure the Service Profit Chain in Distribution
The Service Profit Chain
Jim Heskett et al. first published the evolving Service Profit Chain in Distribution (SPC) model in 1994. Jim and I go back to the fall of 1972 when he taught my first case study class at Harvard Business School. Next, in 1978, Jim’s research group wrote a case study (on a turnaround I did) entitled, The Small Order Problem. During 1980, he turned me on to how FedEx’s People, Service, Profits model was delivering perfect service. And, then in 1982, I adapted FedEx practices to a successful distributor turnaround.
For more on how I’ve adapted the SPC model to distributors go to Google and search for “merrifield + service profit chain”.
Continue reading 53. Best Practice: Focus and Measure the Service Profit Chain in Distribution
52. What Makes a Profitable Branch Profitable in Distribution?
A monster distribution chain CEO asked for ideas to include in a regression analysis. Then, they had hired a consulting firm for $500,000 to co-identify ninety-six financial factors to correlate with branch return on assets. What Makes a Profitable Branch Profitable in Distribution?
Thinking of some of the prioritized factors in my kinetic chain model, I asked whether they had:
- One number to score the quality and years-in-place of the branch managers? (Management)
- One number for share of the number one target customer segment? (Strategy)
- The number of credits per thousand line items processed? (Systems)
- The number for gross profit dollars per full time equivalent employee? (People)
Continue reading 52. What Makes a Profitable Branch Profitable in Distribution?
51. Warren Buffet’s Favorite Metrics
There are limits to financial analysis. Financial analysis measures what’s easy to see and count in the past, and “the numbers” are all symptomatic outcomes of your controllable input decisions. So, using financial reports to be cost, asset, and cash flow efficient is smart, but you can go one step further and uncover financial blind spots with your own invented models and metrics.
Would Warren Invest in You?
Warren Buffet places big investment bets. He buys companies that have super-profitable niches, or moats, with a focused strategic effectiveness. These are companies that throw off free cash flow, have great management and a leadership that plans to protect, grow, and leverage the moats. They are also companies that have systems that will scale their moat’s strategy for growth.
How do you measure intangibles like effective strategy, management, and systems? Here’s how.
50. Analytics in Distribution, Theories, Bias Inefficiencies and Courage
Analytics Without Upside Theories Fizzle
Don’t use analytics in distribution to grind existing information finer and faster. You will get interesting, but non-actionable data. Start instead with an improvement theory. Then, build an analytical model to validate an improvement theory for your distribution. You will find insights to exploit and can track subsequent change experiments with new metrics.
Distributors, for example, have a mix of very profitable and unprofitable items, picks, orders, and customers hiding within averaged-out, aggregate financial numbers. Instead, create a cost to serve (CTS) model to expose the big profit cross-subsidies and then pursue a new metric like: make 100% of customers profitable.
Continue reading 50. Analytics in Distribution, Theories, Bias Inefficiencies and Courage