Strategic Insights 36
LET A THOUSAND, PROFIT-IMPROVEMENT INNOVATIONS BLOOM
Distributors with “Line-Item,
Profit Analytics (LIPA) Management” capability can:
Go “Open Book”
employees on bottom-line, gain-sharing incentives
Watch everyone grab
newly visible ways to increase customer value and/or lower service costs
Pay big bonuses
out of even bigger profits
Work less and
LIPA improvements will lift
all of following, building-block metrics:
the average: Gross Margin Dollars (GM$) per
line; order; stop of a truck; active customer; and
Full-Time-Equivalent-Employee (FTEE). The extra GM$/FTEE then flows to greater:
operating profits; profits/FTEE; and bonuses/FTEE.
I-DON’T-BELIEVE IT! QUESTIONS AND CONCERNS:
I DON’T BELIEVE
IT? WHAT DISTRIBUTORS HAVE DONE THIS? Contact me for case study testimonials in
three forms: write ups; videotapes of CEO’s telling their stories; or happy, successful
CEO’s to call.
AGAINST OUR RELIGION!? Not a bad policy, IF profits are anxiously weak and
improvement plans are: to try harder at the same old tactics; nickel-dime other
stakeholders; and hope. But, if LIPA reveals previously hidden, low-hanging,
profit-fruit, why not pay everyone to see and seize it?
FRUIT OPPORTUNITIES? Some highlights:
Incent Reps to improve
the Net Profit of their customers. They’ll use LIPA tools to find previously-hidden,
inefficient, buying kinks to kettles within
every customer’s buying history. Simple tweaks
reduce small-dollar-picks and emergency orders that cost both parties. Customers’
hidden costs for downtime decline. Their uptime, on-time work and their customers’
satisfaction all improve. To maximize new benefits, customers give you more
volume. And, the new, buy-sell-process cures create barriers for both old and
new competitors. (Or! Incent Reps on GM$ to compel them to give away (extra)
services for free to win more GM$s. Blind them to or make them risk-adverse
about lose-lose, cost solutions.)
profitable (target) accounts, the Reps (and team) can do audits of every element
of the buy-sell relationship to buff them to “10’s”. Small investments for
upgrade improvements pay big returns.
Your buyers can
re-tune fill-rates on the top 1% of the most
profitable and popular SKUs and find a mix of ways to fix the 1% most
unprofitable, small-dollar-pick items. GM$ per pick, order and customer
will all increase due to both sets of solutions.
Have associates know
by heart the few, super-profitable accounts. Teach them to do spontaneous, Heroic Service Extras to help win more
customer share. Teach them Service Triage.
When all service needs can’t be done on time, most profitable accounts will
be favored over losing, minnow accounts.
On all future bids, associates will ask
upfront questions about projected, service-activity details. What will be the estimated
number of: picks, deliveries and delivery
locations? When the bid totals are big, but the average GM$ – per line, order
and delivery – are too small: let competitors win. Or, offer to help the
customer write the bid to make the high, service-activity costs visible. Then, you
bid with activity-cost knowledge. The service-activity-cost-blind competitors
may be spooked by unknown, high costs and either not bid or bid too high. You
will win more bids that are always profitable.
Profit Innovation – ideas, experiments, learning and results – will bloom
WHO WILL LEAD
THIS? WHERE WILL WE GET THE TIME TO DO THIS NEW STUFF?
Reps past their peak physical and mental-energy years who are income-comfortable
will be a challenge. Educate them on how they can make more by doing less and
having fun. The top and bottom 1% of the most profitable and unprofitable
customers and items are all extremely so. Small tweaks to the extremes produce
big, quick results. Then, confidence and innovation can snowball!
If everyone is
tied into bottom-line improvements and everyone’s contributions are
transparent, then there is no place for coasters to hide. Hard-workers will
goad the entitled coasters into action.
And, for more
For keen readers,
overkill education at: www.merrifield.com/EBook
Or, attend the semi-annual
Advance Profit Innovation Conferences. The next one will be 10/1-2/14 in
Phoenix. (Info at: apicconference.com).
CONCLUSION: NEW INSIGHTS + PROFIT INCENTIVES = BOTTOM-UP, INNOVATION
Service businesses with weak
profits have been doing industry (herd),” best practices” for too long. They
have no competitive – difference, value and/or cost – edges. So, give employees
the full information on the Value Equation: “Value (GM$s) – CostToServe
= Profits”. Add a bit of education and a profit-improvement incentive and get
out of the way.
The first competitor in a specific
market to use LIPA Management will capture the easy, key-customer gains and jumpstart
the firm on to a high-performance trajectory. Rent the LIPA Management web
service by the month and be up and going in three weeks. Be in touch for a
desktop demo at your convenience.