Category Archives: Index

35. Don’t Be A Fading-Economy Statistic

Distribution Strategy, Index, Line Item Profit Analytics, LIPA, Profit Analytics

The Q2 earnings for publicly traded distributors aren’t pretty. After netting out financial tricks, most distributors are reporting lower sales and profits. Going forward, will you be happy with just matching them, cutting costs, and trying harder? What about profitability and fading-economy statistics?

Why Not Find More Gold In Big Accounts?   

How? Apply a cost-to-serve (CTS) model on every account so you really understand your net profit and loss potential, and the fading-economy statistics. Then, investigate the sub-groups to uncover the: Continue reading 35. Don’t Be A Fading-Economy Statistic →

34. A Warehouse Robot Model for Every Distributor?

AmazonBusiness, Index, Profit Analytics, Supply Chain Partners

Have you considered a warehouse robot for your distribution business? This is becoming an increasingly attractive cost-saving solution, especially for high-volume, small-pick areas. Take a look at these two references for breakthrough news:

  1. This Bloomberg article from June 29th talking about a robot arms race in the distribution world
  2. This short video and other informative articles on the Locus Robotics site

Continue reading 34. A Warehouse Robot Model for Every Distributor? →

33. Getting to Win-Win: Larger-Order Solutions

AmazonBusiness, Index, Profit Analytics, Supply Chain Partners

Analysis: 62% of Small Order Are Money Losers

Looking for Larger-Order Solutions? Here’s an eye opener. Calculate the average cost of processing an order at your distributorship. (Annual operating expenses divided by all transactions.) Then, skim the daily transaction log for all orders with gross margin dollars less than your average dollar-cost per order.

Don’t panic at the number you see! The average Waypoint Analytics’ client starts out with 62% of all orders being losers. But, don’t comfort yourself by using incremental  cost per order logic. Sixty percent of your orders isn’t “just one more order”; overhead costs must be assigned! Continue reading 33. Getting to Win-Win: Larger-Order Solutions →

32. Steal Selling Ideas From Leading Edge Distribution Channels

Distribution Industry Sales, Index, Line Item Profit Analytics, LIPA

To reinvent your selling value, look for ideas in the most advanced distribution channels. What are reps in those micro-worlds doing that you can borrow and adapt to yours?

A Technical Product Rep With 4 Customers

Channel reps tout their product expertise. But, my friend, Alex, is the real deal. He sells artificial joint-parts to orthopedic surgeons. His “territory” is four doctors. He assists them in ordering the right, best-fit parts for each patient’s joint and conditions. Then, he often dons surgical scrubs to advise the docs during surgeries. He is the expert when patients have odd joint issues (upon open inspection) or need newer-model or rarely-used parts. Continue reading 32. Steal Selling Ideas From Leading Edge Distribution Channels →

31. What’s New In Distribution Strategy? Not Much

Core Renewal, Cost-to-Serve Math, Distribution Strategy, Index

“Distribution Strategy” is a mature 50-year old. But, 90% of distributor’s (that do financial performance surveys) need some Strategy homework. Their 15-year-average grade is 7% Return on Total Assets while the top 5% have been scoring 22%+. What strategic wisdom are the Distribution Strategy Nerds following?

IMITATE THEIR STRATEGY GUIDELINES  

Actually, don’t imitate anyone’s strategy. Their competitive soup and strengths aren’t yours. But, do imitate guidelines that generally work for distribution channels. Like:

  1. The power — in mature, consolidating channels in which 90% of sales are on commodities in global, excess supply — has shifted to the larger, growing/consolidator end-customers. So:
    1. Partner and retain these customers better than your competitors to grow faster and more profitably. (Do all employees know your top 10 customers by heart?)
    2. What do these customers want? More supply-chain value and/or lower cost solutions. (Get/learn: Line Item Profit Analytics (LIPA) and Cost-To-Serve (CTS) Math to sell them what they want.)
  2. Don’t service all customers with the same standard service model and experience. You will over-serve 50% of your smallest accounts and under-serve 5% of your biggest, profit (potential) accounts.
  3. Shift your service-people, activity time and costs to be proportional to each customer’s profit potential (the reverse of #2). Then, eat competitors doing #2.
  4. Service-value metrics vary with the needs of each customer niche. And, bundled or unbundled services with the product prices depends upon customer volume and average order size.
    1. Tiny customers pay for most services a la carte.
    2. Big accounts can get “extra services for free” if they meet some target Sales and Sales per order.
    3. Find and cure the Big-Sales, Small-order customers that are killing both parties with hidden activity-costs from too many, small orders.
    4. Get the LIPA and CTS analytics to support guidelines 4.a-c.
  5. With customer profitability analytics identify your Core customers: the 10-20% that provide 120-140% of your profits to pay for your losing accounts. Do a “Core Renewal” to: 2X Sales; 2X GM$s/employee; and 5X Profit Dollars/employee.

EDUCATION/EXECUTION SUPPORT:

30. Dynamic, Service-Triage-Program: Case Study

Concierge Customer Service, Distribution Industry Sales, Distribution Strategy, Index

Do you want to hire the best employees and keep them stoked? Here’s a successful distributor’s thinking and how to put a service-triage-program in place:

  1. Best employees (like thoroughbreds) cost more upfront. And, they want a career growth path.
  2. But, raises and profits to reinvest into growth must both come from growing Gross Margin Dollars (GM$s) per Full-Time Equivalent Employee (FTEEs).
  3. So, freeze headcount and trade low, unprofitable, GM$/service-hour, accounts for high GM$/hour accounts.
  4. How? Give your 5 most profitable and 5 most potentially profitable accounts much better service.

THE PROGRAM:

  1. Every employee memorizes ten biggest (potential) profit accounts.
  2. Ideas are listed and play-acted for diplomatically giving “the Big 10” line-cutting service at the inconvenience to unprofitable “minnow accounts”.
  3. Service goals for the Big 10: they will never be handed off to another employee with any delay or fumbles. They will get: faster, perfect and more-creatively, thorough service.
  4. Give everyone customer profitability information and trend reports for both GM$s/FTEE and Profit$s/FTEE. If Profit$s/FTEE clears a target, then gainsharing bonuses accrue for all.

TRIAGE EXAMPLE:

All inside sales people were busy. #2 Target Account calls. The “overflow person” enthusiastically tells #2 to: “Wait just one second”. Then yells: “Can anyone Triage for #2?”

Tony is talking to “Micro-Plankton Man” (MPM). In mid-speech, he hits the blinking button to work with #2 for more than an hour. #2 needs some product specs, pricing and a shipping date – for a potential factory direct order. Tony walks the call over to purchasing. The team (using the speaker phone) calls the factory to get all needed information in record time.

#2 then quotes their customer and wins by being the first-back bid. Tony and associates then collaborate with #2’s folks to create a “Speed Quoting Wins” process.

#2 then wins more business with faster quoting. Their purchases grow from $30K to $500K with profits rising from 3 to 6% of sales. MPM’s sales, meanwhile, go from small at a loss to zero. He switched to a competitor when assigned to a new service model and terms that would have made him profitable.

The team needed MPM’s service activity and more to reinvest into #2’s booming activity without adding people. GM$/FTEE doubled; Profit$s/FTEE quintupled; and gainsharing bonuses and reinvested profits/FTEE happened.

Will you lose key accounts and gain more minnows? Or, get Waypoint Analytics  first to hit competitors both high and low?