Monday, November 26, 2012

Planning Part VI:Our Friend Technology

Technology – Our Business System is our Friend
While not yet given a fruit name, your business system is your best piece of technology.

Business data is a competitive advantage.  I find it weird that many distributors have laid out big piles of hard earned cash but most aren’t getting their money’s worth.  Imagine buying an efficient new warehouse but still stacking stock on grandpa’s homemade wood racks.  Sounds goofy, but according to a sampling of consultants form our business, the average wholesaler uses only half of the power of their largest technology investments.  End of year is the time to bring your crew to a new level.

Customer Data by Product Line

For just a moment, forget the fancy CRM package, forget spending thousands on iPads, postpone that next version of smart phone, they’re all nice to have but customer data is a must have.  Here’s what we’re talking about:  Sales and gross margin numbers by product line on a monthly basis.  Without this kind of information, it’s easy to miss opportunities. 

If the information is there, get it out.  Before you decide to delegate the dissection of data to your sales managers, think about these two facts:

·        If it costs a few hundred dollars to happen, how much does it cost per hour if your sales leaders take an extra hour a month to crank the data out by hand?  If you value your sales managers at $150 an hour, calculating the information for just one hour per month costs $1,800 per year.  Sales managers tell me they spend about 6 hours a month – that’s $10,800 a year.

·       The experts (whoever they are) tell us selling to existing customers is 5x easier than selling to new prospects.  When you lack sales by product line, it’s darned hard to tell what you’re not selling.

Salesperson Data by Product Line

Just like customer data, lacking the ability to accurately (and objectively) understand your sales team’s performance by product line creates difficulty in evaluating sales effectiveness.  When you understand precisely what your salespeople aren’t selling, training and coaching move to the next level.  A monthly report by salesperson fixes those issues.

Strangely, many distributor ERP systems allow for these reports but the data lies just below the surface.  Before you spend money on additional products or services explore these areas:

Daily Price Overrides

Think about your official price strategy.  Here’s the difference between strategies that work and the ones that don’t.  If everybody can override system price without answering to anyone, then whatever your strategy; it isn’t working.

I used to be able to remember the guy who said, “That which is measured improves”.  Regardless of the origin, I believe it.  What gets measured is the role of a manager.  If you don’t know who is overriding your price, you need to study it.  Without your instruction and coaching, it’s pretty easy for a new customer service person to short circuit your pricing strategy. 

Automate your Special Pricing Agreements

Since we’re on the subject of pricing processes, here’s a thought for you.  Special PricingAgreements (SPA’s) and their close relative the Ship and Debit program, were but a glimmer in purchasing agents’ eyes during the big recession back in the 1980s.   A couple of recessions later and distributor land looks like the sweeping fire in a Smokey the Bear poster.  I am hearing growth ranges that sound like, “we used to have 30 or so SPA’s now we have 200.”

Clerical and computer errors in SPA accounting may be costing you thousands.  This is amplified in the case of ship and debit methods in place.  I can think of a dozen distributors I know who have reported losses in the thousands because somebody was out with an illness.

An automated system gives you build a procedure and process.  If you do it right you’ll have metrics and coaching points to fix the system while everybody remembers the details.

Before you ask…

Are there dozens of other things you could be doing?  You bet.  If we try to get all of them done, you’ll run out of bandwidth.  And remember, that which is measured improves… or something like that.

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:

Friday, November 16, 2012

Planning Part V: Manufacturer/Supply Partner Relationships

Ever feel like you're wearing this t-shirt?
Manufacturer/Supply Partner Relationships

Stuck in the Middle with You

A quick blast from the past: its 1972, you’re tooling down the road in your dad’s Oldsmobile grooving on Casey Kasem’s American Top 40 Countdown.  As you navigate your way through the A&W parking lot, Casey spins the song soon to be the theme of distributors everywhere, “Stuck in the middle with you”.  And, just like the song says, we in the distributor world are stuck in the middle with our suppliers. This means supply partner planning is every bit as important as customer planning.  And keeping with the lyrics, you may find you're dealing with both clowns and jokers along the way.  Discovering and handling these will contribute to your success in the coming year.

Supplier Stratification

As with customers, the first step in building a plan (and a strategy) comes in understanding the positioning of your suppliers.  I call this supplier stratification.  Fundamentally all suppliers fall into one of 6 categories:

1.      Profit Partners – these are the suppliers who account for day to day profits.  They work closely with your team to grow business today and provide the revenue flow that supports your business.

2.      Strategic for immediate growth – these are suppliers that allow you to produce growth and revenue next year.  Often these are product lines on the periphery of your current sales.  For example, an electrical distributor might produce immediate growth by working with a vendor of electrical safety equipment.  Just a little attention today could produce growth without a great deal of training and positioning.  These will never make your top 10 suppliers, but adding a couple hundred thousand to the top line sale is not a bad thing.  (By the way, I recommend setting a minimum growth amount to make this list.  This varies from company to company but $100K in two years is a good starting point.)

3.      Strategic for long term growth – these are accounts which drive your company into the future.  They stand in place to be major producers sometime in the next 5 years.  As our world changes these manufactures are emerging technologies which position your company over the longer haul.

4.      Customers want them so we keep them around – suppliers that you would like to convert their sales to something else but customers keep asking for the brand.  Some manufacturers have strong brands but employee saturation distribution.  They bring little strategic value to your company, the margins may be low, and they do little to improve your place in the market. 

5.      Line fillers – we all have them.  We take orders for their products but don’t really proactively sell their products.

6.      Don’t know why we have them – do little for us and occupy a small place in our catalog and on our shelves.  We probably would have severed ties but just haven’t gotten around to it.

Understanding the profit picture involves more than just Gross Margin percentage…

Many distributors make the mistake of evaluating their suppliers on gross margin alone.  But the top performers have developed more comprehensive methods for scoring their vendors.  Things like ease of doing routine business, “pull through” of other products, ability to support your efforts and aggressive distributor friendly marketing plans must be taken into consideration.

If you have not already developed a supplier scorecard, you should make this a top priority.  Stay tuned, because we will soon be making our own scorecard available…

Supplier planning is critical

We don’t have time to plan with everyone.  But armed with your new stratified vendor list, it should be obvious who deserves your time and effort. Your plans should include joint marketing activities, focused training, and expanded product launches.  It should also include some very specific product targeting. 

Any plans should include dates, responsibilities, and desired measures of success.  Dates for some kind of formal plan review must be a part of a real working plan. 

If the vendor doesn’t want to join you in real action oriented planning, if they don’t want to carry the burden of their portion of the activities, or if their local team refuses to engage, now is the time to reevaluate their position in your stratified list of supply partners.

Does your sales team know the status of the suppliers?

Strange as it may see, many distributors struggle because their sales team doesn’t know the status of suppliers.  Sometimes they do know but refuse to follow management direction because of personality conflicts with the local team of your best suppliers. 

End of the year planning includes spending time explaining the importance of a unified push into the market.  Some of your “lone ranger” sales types may need more than a pep talk.  I recommend scheduling follow-up meetings on a quarterly basis to insure your market direction is followed. 

There a quite a few more points for the more advanced distributor (we will be publishing a more complete document soon), but armed with this short list you’re on your way to a great end of the year plan.

Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:

Wednesday, November 14, 2012

Frankly Speaking: Automation Fair 2012

Rockwell Automation Fair from the Street Level

I attended Rockwell’s 21st Automation Fair last week in Philadelphia, and since loads of people are asking, I thought I would share a few thoughts on the fair from a street level perspective.  Over the years I have attended all of the shows but one, so I feel relatively well qualified to comment.

First, in spite of Hurricane Sandy and Northeaster Athena, the attendance was strong.  Rockwell published the first day’s attendance at somewhere between 9,000 -10,000, but it definitely seemed like more.  The booths were packed and the people seemed qualified.  The show started at 8:00 AM and unlike many shows that start off slow – the line had already formed at 7:30 in the morning. 

I saw attendees from virtually every corner of the globe.  This shindig really is a world event.

Secondly, I saw my all-time first planning issue with one of these fairs.  They ran out of cookies at lunch on the first day.  While this is a small matter, it is a first.  You can probably tell I am food oriented because I also noticed this year’s fair included massive piles of donuts.

As in the past, there were tons of cool new products introduced at Automation Fair.  The list is online here:

My vote to the coolest new things goes to FRABA, with the introduction of a programmable potentiometer for industrial positioning applications.  Here’s why I am excited.  This thing is a drop in replacement for old time positioning pots, but the guts are a magnetic absolute encoder.  It’s programmable without the need for any tools.  For an end user, it eliminates the need to stock multiple replacement units.  For distributors, it allows a single unit to serve as “service stock” for dozens of customers.  Read about it here:

Finally, the Automation Fair continues to be one of the best automation related showcases in North America.  If you are an automation supplier that doesn’t compete with Rockwell, you should check it out.  For those who do compete with Rockwell, I suggest you build on their model.

Monday, November 5, 2012

Planning Part IV: Building a Better Plan

Building a Better Marketing Plan – Annual Planning

Let’s have a difficult discussion.   The cold hard facts are most distributors do a lousy job with marketing.  Over the years, most distributors leaned on the brand recognition of their supply partners.   In a few instances where their major supply partners use very limited or exclusive distribution, this strategy may even work.  However with just a couple of exceptions, meaningful exclusive channel partnerships are slip sliding away.  And this leaves distributors with a need to crank up their marketing efforts.

In distribution there are three basic components of marketing (ranked here from easiest to hardest): sales aids, sales events and brand building.  Experience dictates marketing people on distributor payrolls tend more towards the keeper of the trinket closet key and event coordinator.   We are not bashing them for the work they do, but we do believe it should be expanded a couple of notches. 

Let’s take a look at how we might move our marketing effort forward in the coming year. By answering these sets of questions:

The Distributor Brand

·         What makes us different from the competition?
·         How do we want to be seen by our customers?
·         Can the salespeople relate to our brand?
·         How does this play into the supply partners we have aligned ourselves with?

Target Focused Questions

·         Which of our product lines are strategic to long term growth?
·         Which customer segments offer the easiest path to growth in sales and market share?
·         How do our marketing plans directly impact our targets?
·         Who at each of our customers do we have the best relationship with?  Are there people we should be reaching out to?
·         How could a marketing effort assist the sales team in connecting with targeted new customers or new contacts at existing customers?
·         What new updates may be required for our website, newsletter, and other electronic communications tools to appeal to our target group?

Vendor Focused Questions

·         Are there vendors who require specific market activities? 
·         Who offers co-op dollars to fund certain activities?
·         How easy is it to take advantage of the dollars available?
·         Which vendors have marketing materials which could be crafted into our own materials?

Event Focused Question

·         What major event should be positioned on our calendar?
·         What resources are needed for the events?
·         What is the time line for developing materials? (invitations, promos etc.)

Promotional items

·         What promotional items did we purchase last year? 
·         What was their purpose?
·         Are there any which proved to be more/less successful than others?
·         Are there any that should be discontinued?
·         How have technology trends affected the impact of our promotional items?

Only after these questions have been given serious thought can a true marketing plan be laid out for the coming year.  Your company can be more effective and produce greater profits “just” by thinking about your current activities and promotional items.  If you push the envelope towards the strategic and brand building – you create better sales results.

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook: