Commodities & Sales Organizations … Questions to Ponder

Commodities and sales organizations have been occupying our thoughts the past couple of days and we thought we’d give you something to ponder over the weekend:

• Purchasing magazine has an article entitled “Commodity prices are up–hedge or source?” Remember, they are writing for purchasing agents … raw materials, capital projects and MRO work.  The essense of the article is that according recent survey from the Corporate Executive Board points out that commodity prices are the number one emerging risk factor for businesses right now. The answer, according to the CEB, is hedging.  The article goes on to say why companies consider hedging and then closes with another alternative “develop supplier partnerships” and “enter into fixed price contracts with suppliers”.

• On a different front, was conducting a product mix analysis for a client yesterday. Doing it by customer and by salesperson, which generated a couple of questions:

• Do distributors know what their salespeople sell, and more importantly, don’t sell to their customers?

• Additionally, when looking at each salesperson, some had 20 accounts, some 40 accounts and a number over 125 accounts.  Having too many assigned accounts means either no one gets attention or there are many small accounts. Is this the best strategy?

• Why do distributors compensate salespeople for accounts that are small volume generators (i.e. <$12,000 per year at a minimum)? These accounts are not profitable if you consider the transaction costs and sales commissions. (and yes, we know the argument by salespeople of supporting their compensation and the account might develop into something – but at some point in time, 2 years?, it typically doesn’t for that salesperson).

• Should distributor sales management be more proactive and planning-oriented?

  Just something to ponder over the weekend.  Let us know your thoughts (even if anonymously).