What you did some years ago.
If you went to your favorite fishing hole in your business, it could be your Product Data and the way you priced product. Some are old enough to remember that when they set up their Bright shiny new ERP system software and computer, you were faced with loading product data and some type of cost, unit of measure, maybe a UPC # and maybe a price matrix for different customers. All felt well about their pricing.
Purchasing and Inventory
As many began to purchase product and began to try not to load up too big of an inventory, along came manufacturer price changes. Some went into a panic, while others viewed a price change as an opportunity to make more profit. All conquered the price change in different ways.
Inventory
In order to keep the right amount of inventory on the shelves, some elected to go the VMI route of Datalliance. Those were good choices for both the manufacturer and the distributor. Others used the math that came with their ERP system. But others still watched in horror as their physical inventory grew.
So some began to watch and control their special orders, non-stock orders and general ordering policies.
Rise of the SPA/Rebate
Manufacturers fielded request for special customer/political body pricing and thus came the horror of claims/rebates for the vast majority. For those that thought the SPA through, it turned out to be a loan to the manufacturer and then some distributors learned how to claim and get credit back in 72 hours or weekly. Others struggled.
But many distributors were stuck on 3% net at the end of the year … and now their loaning money to manufacturers!.
Silent Margin Killers
There has always been a high cost to margin because of incorrect data. In fact there are distributors that cleaned their product databases and have seen an increase of 4% to as much as 8%.
But soon after attaining that increase in margins, distributors started reporting a decrease. Upon closer inspection of their transactions (down at the line level) it became obvious that some sales people were ‘pounding in gibberish products’ with some sort of price that only they knew about. The majority of these items had little or no profit. In some cases the product that was being shipped was a common everyday item and the sales person needed a better price to get the order. I could bore you with additional observations about price changes, but the keystrokes that your outside and inside sales people make could cut your margins by 4-8%.
How do you handle that?
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