Thursday, February 19, 2009

Ship and Debit Special Pricing Programs

-->It’s happening more and more. Distributors and their Supply partners are negotiating special pricing agreements. In some segments of the Electrical Distributing business over 80% of the product sold goes out the door at a price which is below “normal distributor price”.
The process usually works like this: The distributor buys a product for full price - Puts it in his warehouse – then sells the product below full price. After the sale, the distributor submits a report to the manufacturer and is issued a rebate/credit.

We grew into this pattern little by little. We started off with a few agreements and a couple of catalog numbers. In today’s market, cash is becoming an even scarcer commodity and this practice often involves tens of millions of dollar. A study conducted by The National Association of Electrical Distributors sited that many distributors do without this cash for over 30 days. Often this comes about because the distributor has a poor process. To add insult to injury, I can think of at least a dozen incidents where the distributor’s poor process ended up with lost reports and lost cash. SAP has computer software to sell, but let me implore you to design a real process – with written checks, balances and quality control.
Read the full article here.

Click here  for a brief tutorial on special pricing agreements and ship and debit programs.

Monday, February 9, 2009

Recessions have a beginning and an end, Smart Distributors plan for both

There is absolutely no way to predict the exact time and day, but trust me all things must come to an end. Recessions begin (ours began for most of us sometime in October) and they end. The problem for most of us lies in long range planning. Without planning, we are caught off guard. We may find ourselves reacting rather than following a plan. We tend to act like the recession will last forever. I pose a question, what have you done to build a plan for the recovery. It’s all about positioning. What will you do at the first signs of recovery? What can you do to position yourself now?

Recovery May Be Quicker Than Expected Once Turnaround Begins.

The Wall Street Journal(2/9, Lahart) reports, "Last year's credit crisis hit the economy with a surprising jolt, and most economists expect the recession to drag on until at least the end of 2009, with only a meager recovery after that." But "history says they could be surprised by the speed and strength of the recovery -- once the economy shows signs of turning around." Of the "10 largest quarterly drops in final sales over the past 50 years, nine were followed by rebounds the following quarter, with an average gain of 5.4%. The chance of any rebound in the current quarter seems far-fetched after last week's dismal reports on January manufacturing activity, chain-store sales and jobs. Still, if the government's coming stimulus package and bank plan are able to restore a modicum of confidence in the economy, recovery could come surprisingly quickly."