October 21, 2017


















Exhibit 32

LEAD TO GOLD ACCOUNTS

ASSUMPTIONS

  1. We can get by the shock and disbelief that big losers are big losers and start to ask how they grew up to be that way.
  2. There is no faster way to create operational slack that can be dynamically re-deployed into achieving better total service value metrics.
  3. We will find certain types of sub-categories:
    1. those who grew up nearby on a hand-to-mouth, go-pick-it-up on the way to a job.
    2. those who want a separate invoice (paperwork) for each item that is going to a different job or department. (Both have not valued their time to pick up or their true cost of paper shuffling, not to mention our costs and related losses.)
    3. big institutions that have a we-donít-trust-our-employees, too-low, PO limit. So they come with 10, $50 POís to the counter.
    4. we won a "big" volume contract which amounts to lots of miscellaneous repair parts needed by lots of little repair people in many parts of the plant or operating under one buying group umbrella.
      1. a big potential account promises the good stuff and lots of future business in exchange for a good contract deal which they use to just buy the shorts that their best buddy, top 2+ suppliers donít have. We are being cherry picked for our odd ball items and/or our situationally convenient location.
      2. we check with each department Ė purchasing, inside sales, counter, delivery, trade credit, credit/returns Ė to see if they can think of 1 or 2 customers who drive them nuts with expensive activity for the volume.
  1. We will find generic solutions with customized flourishes for dealing with each sub-category and communicate success stories and lessons across all locations to encourage all to go after these accounts.
  2. Management can visit a customer honcho with the ability to see the total economics on both sides of the fence and the power to decide to "re-engineer" how they buy and make the win-win pitch.
  3. For customers that are systematic cherry pickers, who arenít about to stop buying from their buddies, we can make the unilateral statement of: "we have to make a profit or we canít keep doing business" which is followed by new prices and terms that will allow us make a profit on the current ordering pattern we are getting.
  4. We canít raise prices, charge fees and tighten terms for incorrigible losers unless we are optimistic about how we can re-deploy or lay off operational slack that exceeds the incremental margin dollars that we will lose. Can that happen?

QUESTIONS

  1. In the deeper analysis of the losing accounts, we should test to see if not only we might be overstating the losses, but also whether the losses might even be greater than they look. How could each scenario be possible? But, if either scenario is true, wonít the accounts usually be certified big losers worth addressing?
  2. These big losers will usually be assigned to a sales rep who is getting commission or total GM$ credit for the account. Because the rep is not measured on "PBIT", they may immediately anticipate that they will be taking an income hit. How can we win their support during the transformational process of "lead to gold" or hardball, house account treatment for the cherry pickers?
  3. How could we change our incentive plan for sales reps to give them a constant incentive to manage all accounts to be PBIT-positive and exceed some minimum average order size in GM$?
  4. Because management needs to go over the sales repís purchasing buddiesí heads to a honcho, they will be afraid that the buddies will be threatened and retaliate. How can we solve this problem?
  5. Who on our side has a big enough title on their card and an opening line good enough to get into to see a high-enough honcho that can re-order a re-engineering of the buying processes and policies?
  6. Who on our side is creative enough and empowered to change how we sell and service to come up with a customized, win-win, solution with a big losing account?
  7. If we can persuade, 60-80% of the lead accounts to work with us and we reduce activity costs and boost average order size significantly, what will happen to the operational slack we will create? How do we measure it? How do we strategically redirect it or perhaps even lay some of it off?
  8. If some big losers totally walk, are we happy with plan B that involves either:
    1. Re-deploying slack where the benefits outweigh the minimal lost GM$; or,
    2. Laying of more personnel service expense people costs than we lose in GM$ by at least a 2 to 1 margin?