Amazon
offers 230 million items (including offerings from their marketplace stores)
and climbing. Their mission: “Be the most customer-centric company on the
planet”. Their service-cost structure is already much lower than your
old-school model. They will pass their savings on to your customers in lower
prices for your most, net-profitable, freight-friendly, whole-goods. By 2020,
they plan to invent a one-hour-delivery option for a premium fee: unbundled
customer choices!
·
How will you counter price pressure on your cream
items?
·
What might your customer-centric sales force and
service team (unbundled fees?) look like?
SUPPLY-CHAIN PARTNERS WILL CONTINUE TO KILL THE
PRICE BUYERS & SELLERS
Meanwhile,
supply-chain buyers and sellers continue (as partners) to kill your customers
who shop distributors for “better prices”. Since Ray Kroc, founder of
McDonald’s, partnered with distributors back in 1956, the typical, proactive,
supply-chain-buyers’ action steps have been:
·
Pick the
best-service distributor.
·
Give that
distributor ALL of the category business in
exchange for:
o
Guaranteed
Perfect Service.
o
Continuing
improvements in buy-sell process effectiveness moving towards:
§ Zero paper and people activity-costs; and,
§ Best, uptime-productivity inventory levels.
o
Lower prices:
only if afforded by process-improvement, cost-savings. (McDonald’s audits
suppliers’ books and has been historically generous on supplier profits!)
o
(1) Good
net-profits with (2) growing sales and a (3) forever-relationship incent
suppliers to continuously invest in improving the replenishment-process.
o
Supply-chain
effectiveness beats price-savings efficiency and continues to consolidate
channels at all steps. Will you be a
channel consolidator or victim by 2020?
MORE 2020, SUPPLY-CHAIN-BUYER QUESTIONS:
1. Big customers
all have “supply chain” trained people. Some can do the steps above in a
win-win way. Others may need help. Do you have the supply-chain math and
fluency to: educate, sell, negotiate, install and maintain such solutions
for: both the can-do and
want-to customers?
2. How many of your small, self-employed,
price-shopping customers will convert to supply-chain buyers and thrive? Close
to zero?
3. Do you
allocate your sales-marketing expenses in proportion to your customer’s present
and future-projected net-profitability?
4. Or, do you reactively serve all customer problems?
If so, won’t high-maintenance, unprofitable and slowly-dying minnows bleed you
to death by a thousand nicks?
YOUR WORST
CUSTOMERS?
At
the bottom of your customer profitability ranking report, there are customers
with “big” sales and gross margin dollars (GM$s). Everyone knows them, because
they constantly call in (small) orders. The cost of processing their small
line-item picks and orders exceeds their GM$s for a loss. How do you transform them to winners? For answers:
Watch
Randy Maclean’s video on “dangerous customers” at:
·
http://www.randymaclean.com/randymacleanVID.asp?VID=1153
·
Or, check the
index to many case-study, video clips of mine at: http://merrifield.com/playlist9index.asp. Specifically, clips 20-21 and 40-44 will guide
you to super-losers-become-winners-who-buy-more, how-to, case-study stories.
YOUR HIGHEST, NET-PRESENT-VALUE-PROFIT (NPVP) CUSTOMERS
The
most net-profitable (1 to 10%) of your customers will generate about 100% of
your operational profits and about two-thirds of your peak internal profits
(150-165% of operating profits). A few, best-customers are also innovators that
grow faster than their industry by killing weak competitors: also your
customers? Partner these “Gazelles” more deeply by doing a team audit of your
current replenishment process. Find and install tune-up opportunities.
·
What
revised role and comp plan will your reps
have for “audits” and supply-chain tuning projects (as desired by the
customer)?
MINNOW CUSTOMERS’: NOISE TO PROFIT RATIO?
Supply-chain
buyers quietly and smoothly order (electronically) big picks and orders to give
you good net profits. Minnows can be:
·
As much as 50%
of your active account total.
·
Only 10% of
total sales and GM$s.
·
Causing over 40%
of the service activity costs. Their service costs exceed their GM$ by enough lose 20-30% of your
peak internal profit total.
Many
minnows: price-shop, return stuff and pay slowly. They love Reps out of
loneliness and to press them for better prices and free services. If you “listen to the customers” on a
reactive basis, the minnows are all of the noise with negative profits. And,
you don’t have time to proactively partner biggest NPVP customers more deeply.
ACTION STEPS: Subscribe monthly to the “Line
Item Profit Analytics (LIPA) Management’ service from Waypoint. Solve all of
the questions in this note with NPVP-Smarts and Supply-Chain Math precision to
STAND TALL IN 2020!
