August 18, 2017


















Article 8.19

"B2B" MEANS "BACK TO BASICS" FOR NOW

The e-commerce (EC) hype wave is history, but we are still in the 6th year of a 12 to 15 year e-commerce revolution. The raw fuel for yesterday’s digital economy dream is still in place; the explosive growth rates will continue for - chip power, internet interconnectivity, bandwidth capacity and digital commerce software solutions.

The "next big thing(s)" for EC could still be 3 to 5 years away or never. Those applications, for example, that assume most businesses will have continuously on, reliable, big bandwidth connections – "webtone"- will be delayed. The telcom startup companies that were building the digital infrastructure are crashing for lack of cash, so former monopoly companies have gone back to glacial-speed rollouts at higher prices.

Industry supply chain consortia are quickly finding out that creating new e-standards that can stay current while everyone in a given industry actually uses them is a long-term bet at best. Buyers that are using reverse auction exchanges are finding that lowest prices from new suppliers are not as good a total deal as the lowest total procurement cost supply systems from old suppliers. Local suppliers, it turns out, have customer-tuned inventory service levels and services that constantly evolve while providing shock absorption insurance for unforeseen disruptions within supply chains.

There are, however, lots of little EC applications emerging that will gradually affect distribution channels over the next 12 to 18 months. Most of these applications will be services that help traditional individuals or departments within distribution channels keep doing what they are doing more efficiently or effectively.

Examples of specific web-based applications (and vendors) that can make traditional channels more efficient in a down turning economy without disruptive side effects are:

  1. Partner relationship management software packages for manufacturers that sell to and through independent channel partners. (www.haht.com).
  2. Digital media and content management services that will repackage product information in databases for faster, easier access for anyone in a channel to access (www.steadyrain.com).
  3. Store and access services for business documents that allow trading partners to passively adopt paperless relations (www.webarchive.net and www.channelinx.com).
  4. Channel service utility companies that allow equipment dealers to find and buy parts faster (www.arinet.com).
  5. Real time e-point rewards for all types of channel incentives down to the individual education and motivation level (www.emaritz.com).

Keeping on top of both short-term and long-term EC opportunities is important, but even more pressing amongst distributors is the erosion of basic operational profitability. Annual financial performance reviews published by distribution trade associations reveal steady erosion in profitability for all distributors over the past few years, well before the economy started turning down. Why?

BACK TO BASICS

Most businesses have been so pre-occupied with both the EC and Y2K hype storms that started sequentially with the Netscape IPO in mid-’95 that they have forgotten to address the following profitability problems:

  1. Hiring and keeping good employees who can in turn ….
  2. Measure, achieve, maintain, sell, get paid for and leverage basic service excellence.
  3. Measure customer profitability to maintain and grow the winners and shape up or out the losers?
  4. THEN, use the extra time, talent and profitability that results from the first three measures to take first and best advantage of the near term and then long-term EC opportunities that will arise in each distribution channel?

These basic operational opportunities can not be solved, however, until the average CEO truly believes in and puts into practice high-performance service management principles like:

  1. Paying more and investing more into frontline employees to get a lot more in return. UPS, FedEx and L.L. Bean are companies known for - zero errors, 100% on time delivery and good value pricing. They pay 30% to 50% more in total compensation for warehouse people and drivers than the average wage for those jobs. But, they skim the very best work ethic people from other local employers and invest in their education to cross-train them at many different service steps. Perfect service and high employee and customer retention economics allow them to achieve 200% of the average margin dollar per employee ratio for a great return on their employees.
  2. When will most executives really believe their own statement that "employees are our most important asset" and pay and invest accordingly? When will most learn that "hire them cheap and work them hard" works only when the owner is the 80 hour per week foreman in a perpetually small business?

  3. Wiring every employee’s wallet, mind and heart into achieving basic service brilliance for one niche of customers at a time. What would the average frontline service employee say to these questions? Who are your company’s 5 most profitable customers? What are those customers’ most important service measurements in priority order? Where do you post those measurements everyday to insure that they happen? What can you do directly or indirectly to make sure that those metrics happen? Why should you care about any of these questions, what’s in it for you? If the answers are: "don’t know, don’t like not knowing, and nothing more in it for me", then the company has big economic upside possibilities for all stakeholders.
  4. Totally informating the working environment so that every employee can be responsible for growing re-invested profits by being part of the solution to improve service and productivity goals. Playing a game with no way of keeping score or knowing how we are progressing toward some measurably excellent goal is not fun. If our occupational pride and well being is at stake, then its time to leave if we have any ambition. Distinctive service is the only competitive edge for most distributors, and it can’t happen without information feedback to the people who must make it happen.

For those who do believe in these principles and are looking for educational support tools, you are invited to go to www.merrifield.com and click on the "high performance video" button to help co-create a video-based training program for all employees that will help make "high performance" happen.

Merrifield Consulting Group, Inc. Article # 8.19

D. Bruce Merrifield, Jr., July, 2001