Monday, November 28, 2016

Raking Leaves vs. Annual Planning

Getting those pesky leaves before snowfall.
It’s November. The Midwestern Iowa leaves feature Technicolor rainbows of colors; bright red, deep orange, a thousand shades of yellow. A bit of warmth lingers, but Thanksgiving, December, and the Holiday season make this time of year go by quickly. Two painful realities of the season loom in the distance - yard cleanup and annual planning. 

As I jot down these few words, I feel the approaching pain of a future Sunday afternoon manhandling a rake around the property.  Some pay a neighborhood teenager to handle the raking. But it’s hard to find an $8.00 an hour surrogate for End of Year Planning. Planning needn’t be the dreaded task hanging around the corner. Join me as we remove the pain out of the process.

Start early. Many of us don’t dig into the task of Year End Planning until the last minute. A few of us dread the seemingly gigantic nature of the job so much, the procrastination pushes us into next the year. I know people who move paper clip sorting to the front and center in order to excuse themselves from the dreaded details of planning. 

Break planning into smaller bit-sized (and delegable) pieces. Here are a few bite-sized bits of the annual plan:

• Inside Sales/Customer Service
• Marketing/Events
• Non-Selling Expenses
• Demo/Equipment
• Warehouse/Delivery
• Employee Benefits
• Employee Training 

Think, is there a lead person in the Inside Sales Department who might provide you with a rough plan for improving the level of customer service? Could a delivery driver provide feedback on how logistics might be streamlined? Why guess, why assume the burden of everything? Can your marketing person provide insight (cost and projected dates) on desired events? Delegate the gathering of information.
Your accounting department can provide you with a list of expenses for things like rent, utilities, phones, computer lines, taxes and insurances. Push things a step further, ask for best ideas of escalations for the coming year. While nobody has a totally reliable crystal ball, they can give you strong estimates for the future.

Provide your teams with a common format. Have all cost oriented information provided using the same breakdowns as your monthly financials. Use a spreadsheet which can be easily be combined into a final document. 

Evaluate your team – strengths, weaknesses and areas for improvement. Managers and supervisors with direct reports need to take a physical inventory of our most precious commodity – people. The plan should include: evaluations, planned compensation adjustments, training needs and overall skills rating.

Sales Forecasting is the big kahuna of planning. For distributors developing a solid plan for future sales and gross margin is the most critically important step of planning. We recommend using what we call the Who, What, Why approach to forecasting. Here is a short synopsis:
This plan is specific and manageable throughout the year and requires only a minimum of effort to set in place. Here is a simple breakdown:

1. Salespeople are provided with their customer sales for the previous year broken into product categories.

2. Salespeople review each account (who) and estimate future growth or shrinkage (what) by product category. As they review the numbers they answer the question of why this number will grow or shrink – things like one time projects, new products specified, competitive issues and the customer’s own growth are considered.

3. The numbers are tallied by salesperson and combined into

the final plan.

4. Management reviews and compiles the numbers with their salespeople. Many sales guys prescribe to the old tenant of “Sandbagger or Loser” and submit dismally low projections. This must be addressed on an individual basis. The process allows for coaching, mentoring and managing, but that’s another article.

Providing each salesperson with the same formatted spreadsheet and instructions for compiling the date makes the whole procedure easier on management. And, in our experience, a salesperson with the numbers and accounts already laid out can provide pretty good information in just a couple of hours. 

Final words
Would you invest in a business that had no projections, forecast or operating plan for the coming year? Why then do so many distributors simply glance over the whole concept of building an annual plan? 

If you have a planning process, get started early, involve

others and make yours the best ever. 

If you don’t have a process, allow me to recommend a short easy to follow 
workbook: The Industrial Distributor Annual Planning Workbook. It’s on Amazon here.

We also offer more personalized assistance and one on one training calls.  Email today and let us put together a winning plan for your team!  

Wednesday, November 23, 2016

Follow-up Report on Distributor Scams

A couple of weeks ago we posted a story about scams going out to distributors. Well, they continue. Here is something fresh from the inbox, only this time we decided to reach out to the number listed. After several rings it was picked up and answered "FMC Corporation" in a less than professional manner – not a good sign. We asked the person answering if he was Paul Graves to which he proceeded to confirm. Playing the part of a local distributor, we indicated that we provide freight with our orders so in order to properly quote, we required a shipping address. Things got quiet for a moment then we were told the products will be shipped to either Wisconsin, Australia or someplace garbled and unpronounceable.

The person on the other end of the phone asked if we could email our questions to them rather than talk on the phone. I plan to reach out sometime in the near future, just as soon as I set up my own scam email address; something like W. Coyote Automation of Arizona.

These things are prevalent.
I got a call this week from the Channel Manager for a major manufacturer of motion control products. She related that she had received six calls from distributors asking about proper pricing for one of the parts listed in a recent scam request. Further, she indicated one distributor may have made at least a partial shipment to the address provided by the scam artist. Typically, these folks use the address of vacant buildings or empty lots and arrange to meet the driver in route. Thus making it harder for them to be identified.

For your reading enjoyment, and hopefully a money saving tip, here is what the email looked like. By the way, the phone numbers ring to a scammer so beware.

Be safe and have a Great Thanksgiving

Good Morning,
This is Paul Graves from FMC Corporation, we would like to have price quote for ACS550 spec given below;
***ACS550-U1-157A-4 – ABB Wall Mounted Drive, NEMA 1, 3-Phase 380-480V, 125HP....10 units
Thanks and looking forward to your response.
Warmest Regards,
Paul Graves Sr. VP & CFO FMC Corporation FMC Tower, 2929 Walnut Street, Philadelphia, PA 19104 Phone: 215.220.3872 Fax: 215.299.5998

Friday, November 11, 2016

Scams in the Distribution Business

We have all received some sort of scam message or been warned by friends "don't open that" in our personal lives.  I suppose it had to happen sometime. We should be both honored and terrified. Finally, after all these years, the scammers have managed to discover the distribution industry, too.

Here’s the scoop, all of our websites identify with distributors. We publish a lot of information and our email addresses are all over the web. To the untrained eye and Google key word searches, we probably appear to be a distributor. A couple of months ago, we received a request for quotation from a major public university. Looking at it closely, I debated as to whether it was fair for me to forward it to a friend near the school. But I looked again.

The email address for the university didn’t look exactly right – I mean how many big time public institutions have their purchasing department using a Yahoo email address. Still, maybe there was a reason, so I did a search on the college. A strange message came up from the purchasing department (posted below.)

In the next week, I received multiple requests for similar products from other organizations. Here are a couple of examples:
Dear Distributor,
Let me have the price cost for these product.
1,ESV373N04TXB - Lenze AC Tech SMV Series Drive: 50 HP (37 kW),

480V 3Phase input in NEMA 1 enclosure
2,ESV183N04TXB.Lenze AC Tech SMV Series Drive: 25 HP (18.5 kW), 480V 3 Phase input in NEMA 1 enclosure
also With the shipping cost to Romulus, MI 48174 Via Ups next day delivery.
Let me know the type of credit card you do accept for the


I guess business in scam land is picking up.  Notice how the quantities have jumped in this order for different but still industrially focused products:
Attention Sales dept,It's our great honor and privilege to have you as one of our vendor or supplier. My name is Nathan Andridge, Senior Director- Purchasing for Ohio State University.  we are directed to your location to purchase some of the below Listed items.
UNITS DESCRIPTION40 FLIR CM85 Power Clamp Meter40 FLIR ONE for Android1 ZA4208TX-Q Enerpac Air Hyd Pump - Torque Wrench
1 ZA4204TX-Q Enerpac Air Hyd Pump - Torque Wrench
Please indicate all prices FOB our place of business with our payment term via Net due in 30 days after the invoice date and indicate when your price quote shall expire. Advise as soon as possible with price quote so I may prepare the PO and have it send to you to finalize the order.

Best Regards,
Nathan Andridge
Senior Director- Purchasing
Ohio State University2650 Kenny RoadColumbus, OH 43210, USA800-217-2051 Phone614 350-4878

Here is the warning from one of the universities used in the quote scam….

Procurement and Contracting Services Notice to Suppliers: Fraudulent Purchase Order E-mail Activity
We want to alert you to an active e-mail scam involving purchase orders and requests for quotes that purport to originate from UC Davis, but are in fact fraudulent. While the University cannot prevent this illegal activity, we are actively working with law enforcement to investigate these fraudulent e-mail contacts.
Here are some common traits or themes of these fraudulent e-mails that may help reduce risk to your company in becoming a financial victim of this scam: 
• The e-mail message is poorly written, with misspellings and awkward sentence structure• The sender's e-mail address or website link are not authentic to UC Davis• The message requests shipment of products to non-UC Davis addresses• The message may include an attachment that is designed to look like a purchase order, may include a logo or other graphic, and a signature that may look legitimate.
Prior to responding to the e-mail or filling the order, you may verify its legitimacy by contacting Procurement and Contracting Services by phone, Monday through Friday, 8:00 am to 5:00 pm at (530) 752-0370. 
UC Davis values our partnership with you - and appreciates the very important role you play in providing goods and services to our faculty, students and staff in support of their academic, research, and patient care endeavors. Please know that we are assisting to the fullest extent we are able with the investigation of this illegal activity by reporting all fraudulent e-mails to appropriate authorities.
If you believe you have received a fraudulent e-mail, you may forward it to

Wrapping up this bit of cool news.
I believe the guidelines from UC Davis are appropriate. Further, I believe we as a group must be vigilant. One newbie on the order desk could easily read this and send out information which could damage your business.

We are once more offering the River Heights Consulting grand prize of a Post Card from Iowa to anyone who forwards us more of these scam order requests…