Financial numbers alone offer scant profit improvement insights. For real improvement, you must develop a theory for how to improve service value and/or cost effectiveness and then create and capture new metrics to test your theory. This gives you the data to act on what is working. Amazon, for example, has roughly 500 proprietary metrics: 80% are related to customer value improvement.

However, the National Association of Electrical Distributors (NAED) industry overview PAR report does provide some helpful ratios. Insight into the NAED 2016 PAR report can help you understand how to improve your profit.

Continue reading 47. Insight Into the NAED 2016 PAR Report →

To start, Amazon (AMZ) is teaching (especially) – younger, smarter, richer, busier – people to prefer buying on-line. Costly outside and inside reps aren’t in the equation. Follow below for some facts and questions about rep value in distribution.

 AMZ Service v Traditional (Distributor) Service

1. 1. Flexible hours, many prefer ordering digitally 24/7/365 v. 8-5; Mon-Friday; via people.
   2. Speed of Re-Buys: Re-buys on AMZ are faster than going through people. Folks are nice. But, they: slow things down; make mistakes; and offer limited, informational possibilities.
   3. Delivery response-time options from 1 hour, or to a few days beats one standard choice.
   4. Want information and demo videos on anything. AMZ and Google excel.
   5. Want crowd-sourced and rated reviews that beat one Rep’s opinion? AMZ provides.
   6. Other personal activity information? AMZ has it.
   7. Want to Check Prices or get The Best Price for popular, most-profitable-to-distributor items (SKUs that average high, Gross-Margin-Dollars per pick). AMZ has both (or Google it). AMZ can underprice most-profitable commodities due to its lowest cost: web site; warehouse picking; lack of reps; and eventually, last-mile-delivery costs.

Continue reading 46. Best Customer Service? None! Re-Vision Rep Value in Distribution →

The giants of the industry are announcing sales figures ranging from flat to down, to fading sales growth in distribution. Further, if any of the economic bubble(s) around the world pop, then sales and profits will be pressured even more. It seems like a good time to innovate.  But, how?

Earn a Larger and More Profitable Share of Your Biggest Accounts

You already know that your customers’ most urgent need is to stop profit erosion. Their reflexive solution is to shop for lower prices, which of course leaves you on the losing end. However, successful businesses are taking some lessons from judo and learning how to harness this customer desire to create a win-win for fading sales growth in distribution.

Continue reading 45. Judo Selling for Fading Sales Growth in Distribution →

Do you know who your year-over-year big profit swing accounts are? Here are some steps you can take to find your big profit swing customers in distribution. You may be shocked, but make small bets on them in 2017, and you might just get lucky.

1. Create a cost-to-serve model to compute customer net-profitability
2. Have two full years of history
3. For each account, subtract the profits (or losses) from two years ago from this past year
4. Rank all customers in distribution by the profit difference from highest positive gain to biggest negative loss (see the easy, how-to answer at the end!)

Typical Case Revelations

A $50MM distributor just closed its fiscal 2016 year with sales up 6% and profits 10% over 2015. Profit margin improved from 3.5% to 3.8%. They beat local and channel/industry growth rates by a few points.

Continue reading 44. Make Your Own Luck with Big Profit Swing Customers in Distribution →

Who Is Theo Epstein and Why Should You Care?

Hired in 2011 as the general manager (GM) of the Chicago Cubs, Theo Epstein rebuilt the team, bringing them from the cellar to the top of the game with their 2016 World Series win, and broke the 108-year-old curse of the Cubs. Before his Cubs turnaround, Theo did much the same for the Red Sox, helping them win the World Series in 2004 and 2007, breaking their 86-year old Curse of the Bambino. How did he do it? It’s well-known that Theo Epstein invented new analytical tools, metrics, insights, and tactics to create unheard of turnarounds in both teams.
Continue reading 43. Do You Have YOUR Theo Epstein for the Battle of Analytics? →

I was doing some prep work for a speech for the Health Industry Distributors Association (HIDA) when an item on their Members’ Financial Survey jumped out at me. Atypically, the survey had a set of numbers showing the three-year trend for gross margin dollars per full-time equivalent employee (FTEE). It got me thinking about the following.

What’s a Good Level to Grow Gross Margin Dollars per FTEE?

It varies depending on the channel, but among HIDA distributors the average for the last three years has been about $135K gross margin/FTEE. However, the best performer in each of three sub-groups in 2015 was 16%, 60%, and 90% higher than the average.

Continue reading 42. Grow Gross Margin Dollars per FTEE →