Sunday, July 10, 2016

50 Questions for Distributors

Last week I wrote an article titled “Six Questions that Demand an Answer.”  Sharing the article with a few trusted advisers, I received one consistent bit of feedback best summarized by this response.
“Frank, I agree these are questions we must ask ourselves; they caused me to pause and ponder.  I used them as an exercise with my team to think about our overall strategy.  I believe taking the time to think about our business from an outside perspective to be justified and worthwhile.   Sometimes it’s hard to do this subjectively.  I would like to see more questions just like these.”

The following is my first round of questions.  I have put them into categories to make them easier to digest.  Some will apply to your position, some will not.  I suggest spending a moment visiting these topics with members of your own team.

A note:  The readers of this blog come from a variety of backgrounds, hold a diverse collection of positions within distribution and come from a number of lines of trade (Automation, Industrial, Safety, Power Transmission, Fluid Power, HVAC/R, Building Materials and a lot of others.)  Not all of the questions apply directly to you.  Skip over the questions that apply to other departments or forward them on to your colleagues, but do take a moment to think.

Do you believe your customers’ worlds are changing?
1.       Are customers experiencing new global competition?
2.       Are customers under new pressure to perform financially?
3.       What pressures are your customer’s customers putting on them?
4.       Are there governmental regulations which impact your customers?  
5.       Are all customers experiencing the same changes?
a.       In what ways are they the same and how are they different?
6.       Are some customers experiencing shortages in trained workers?

Do you believe your supply partners’ worlds are changing?
7.       Do they have new competition in the market place?
8.       Is there current product technology under attack by something new?
9.       Have they recently been acquired or have they acquired a new division?
10.   Have they lost market share because they have not expanded into big box stores or alternative channels?
11.   Have they had new leadership come into the company?
12.   Is their stock value under some kind of pressure?

Do you believe change at the customer or supplier level impacts your position?
13.   Which five things are most likely to impact you in the next year?
14.   What five things are likely to impact you in five years?
15.   Do you see major customers or customer segments with no long-term future?

How does your sales effort differ today than in 1990?
16.   How have technology tools changed the customer interaction?
17.   What new positions have been added to the sales team?
18.   Do you segment your customers by industry, size and buying patterns?
19.   How do you know which customers are profitable?

Do you have a sales process?
20.   Do you have a written on-boarding program for new sellers?
21.   Do you have well-written job descriptions which explain expectations, measures of success and critical skills?
22.   Have you developed a product knowledge checklist which describes the level of knowledge sales people should possess to meet management expectations?
23.   Do you have a written sales process which defines the following:
a.       Who should be called on at accounts, including customer management?
b.      Behavior on the call? (such as note taking, recapping of action items)
c.       Frequency of sales calls?
d.      Entry of data from the call into a CRM or other knowledge base?
e.      Etiquette on joint calls?
f.        Use of support staff and specialists?
g.       When to introduce management into accounts?
h.      Quotation follow-up?
i.         What you should know about the customer?
j.        When to deviate from standard price?
24.   Does your company have a pricing process?
a.       Do you believe sales people can truly understand the price point for the thousands of products in your portfolio of products?
b.      How are market price levels established and maintained within your business?
c.       What percentage of your business uses “system” pricing vs. salesperson driven manual overrides?
d.      Does your business have a magic number (ie 15, 20 or 25 percent) which is used as a “safe” margin with customers?
e.      Do you measure each sales person against the percentage of sales falling outside of the pricing process?

What tools are used in the sales process?
25.   Do you have the ability to quickly review customer purchases by product technology?
26.   Do you have the ability to provide your sales people with FOCUS Fraction of Catalog Utilized (sometimes called GAP) analysis?
27.   Do you have a working CRM system in place?
28.   Are you capable of receiving EDI orders without manual intervention?  

Do you offer more customer value than in 1990?
29.   What services do you provide that weren’t available in 1990?
30.   Do you measure the internal cost of these services to your organization?
31.   What new services will you be launching in the next five years?
a.       Have you measured your company’s cost for providing these new services?
b.      Will you be charging a fee (outside of gross margin) for these services?

Is your company’s technology current?
32.   Is your ERP system modern and updated with the latest revisions?
33.   Do you have the ability to track inventory which has not been sold for 180 days?
34.   Do you have the ability to accept orders electronically?
35.   Do you have a mechanism for eCommerce?

Can your warehouse/logistics operation keep pace with changes in the world?
36.   Are items placed by location in your warehouse?
37.   Do you use wave picks to make order processing more efficient?
38.   Are errors (shipping, receiving, lost inventory) tracked in your organization?
39.   Is cycle counting accomplished so that fast moving items are counted at least 4 times per year?
40.   Do you regularly write off dead stock and other unsellable inventory?
41.   Is there a plan for efficiently handling returns and defective materials?
42.   Do you know the cost of running your delivery truck?
43.   Do you use GPS tracking on delivery vehicles to expedite deliveries?

How progressive is your financial model?
44.   Do you do a financial projection based on sales forecast for each year?
45.   Do you provide managers with parameters for measuring their portion of the business against industry standards?
46.   Do you benchmark your financial performance against industry standards using an industry profit report or some other national model?
47.   Do you know the approximate cost of transacting business?
a.       What is the cost of placing an order with a supply-partner?
b.      What is the cost of processing an order?
c.       What is the approximate cost of shipping an order?
d.      How much gross margin is required to break even per month?
48.   Have you developed activity based costing number to determine your most profitable customers?

Do you have a succession plan in place?
49.   If you are the owner and you are at least 55 years old what is your plan for leaving the business?
50.   If you are a salesperson within five years of retiring, what is your plan for passing on your deep knowledge of your customers?

We welcome your comments
Truthfully, we settled on 50 questions because it’s a nice round number.  It could have been, and maybe should have been, 100 questions.  What do you think we left out?  Send us your ideas and well send you a postcard from Iowa. 

If you want to talk about any of these questions, we’d be happy to spend a few minutes talking about your situation. Shoot us an email or pick up the phone.  We can’t wait to hear your thoughts.

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