Planning Part VI:Our Friend Technology

Technology – Our Business System is our Friend

While not yet given a fruit name, your business system is your best piece of technology.

Business data is a competitive advantage.  I find it weird that many distributors have laid out big piles of hard earned cash but most aren’t getting their money’s worth.  Imagine buying an efficient new warehouse but still stacking stock on grandpa’s homemade wood racks.  Sounds goofy, but according to a sampling of consultants form our business, the average wholesaler uses only half of the power of their largest technology investments.  End of year is the time to bring your crew to a new level.

Customer Data by Product Line

For just a moment, forget the fancy CRM package, forget spending thousands on iPads, postpone that next version of smart phone, they’re all nice to have but customer data is a musthave.  Here’s what we’re talking about:  Sales and gross margin numbers by product line on a monthly basis.  Without this kind of information, it’s easy to miss opportunities. 

If the information is there, get it out.  Before you decide to delegate the dissection of data to your sales managers, think about these two facts:

·        If it costs a few hundred dollars to happen, how much does it cost per hour if your sales leaders take an extra hour a month to crank the data out by hand?  If you value your sales managers at $150 an hour, calculating the information for just one hour per month costs $1,800 per year.  Sales managers tell me they spend about 6 hours a month – that’s $10,800 a year.

·       The experts (whoever they are) tell us selling to existing customers is 5x easier than selling to new prospects.  When you lack sales by product line, it’s darned hard to tell what you’re not selling.

Salesperson Data by Product Line

Just like customer data, lacking the ability to accurately (and objectively) understand your sales team’s performance by product line creates difficulty in evaluating sales effectiveness.  When you understand precisely what your salespeople aren’t selling, training and coaching move to the next level.  A monthly report by salesperson fixes those issues.

Strangely, many distributor ERP systems allow for these reports but the data lies just below the surface.  Before you spend money on additional products or services explore these areas:

Daily Price Overrides

Think about your official price strategy.  Here’s the difference between strategies that work and the ones that don’t.  If everybody can override system price without answering to anyone, then whatever your strategy; it isn’t working.

I used to be able to remember the guy who said, “That which is measured improves”.  Regardless of the origin, I believe it.  What gets measured is the role of a manager.  If you don’t know who is overriding your price, you need to study it.  Without your instruction and coaching, it’s pretty easy for a new customer service person to short circuit your pricing strategy. 

Automate your Special Pricing Agreements

Since we’re on the subject of pricing processes, here’s a thought for you.  Special PricingAgreements (SPA’s) and their close relative the Ship and Debit program, were but a glimmer in purchasing agents’ eyes during the big recession back in the 1980s.   A couple of recessions later and distributor land looks like the sweeping fire in a Smokey the Bear poster.  I am hearing growth ranges that sound like, “we used to have 30 or so SPA’s now we have 200.”

Clerical and computer errors in SPA accounting may be costing you thousands.  This is amplified in the case of ship and debit methods in place.  I can think of a dozen distributors I know who have reported losses in the thousands because somebody was out with an illness.

An automated system gives you build a procedure and process.  If you do it right you’ll have metrics and coaching points to fix the system while everybody remembers the details.

Before you ask…

Are there dozens of other things you could be doing?  You bet.  If we try to get all of them done, you’ll run out of bandwidth.  And remember, that which is measured improves… or something like that.

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:

http://amzn.com/1481196448

SNAP Analytics (2) - Purchase Patterns

Roughly 15% of the United States population receives SNAP funding to help pay for food and beverage items.  We know that when SNAP (food stamp) funding is released in each state (see SNAP Analytics (1) - Funding and spikes)  this is accompanied by significant sales spikes on some products,

If 15% of all shoppers visit your store within a 2-3 day period you should see a sales spike on  everything they buy, SNAP funded or not . So, why do we not see a spike on everything?  Why are some spikes so much bigger than others?

The chart below shows (simulated) daily point of sales data for a SNAP-responsive product in one state.  The horizontal axis shows days of the month, the vertical shows a sales 'Index' relative to the average day.  You can see that sales around the 1st and 10th of the month are roughly double what they are on other days.

If you also know that this state releases SNAP funding on the 1st and 10th of each month, you might assume that the SNAP shopper takes their newly-charged EBT card and within 2-3 days spends the lot.

A relatively high proportion of SNAP funding is spent quickly and this ties well with the idea of a "stock-up" trip.  (If you have the capability to see basket size by date, you should be able to confirm that baskets around SNAP release dates are substantially larger than otherwise.)

So why do I think that this does not represent all SNAP spending?  

Some products are just not good candidates for a once-a-month stock-up trip.  Milk for a month?  I don't think so.  Bananas seem to go soft in my house if I forget them for 1-2 days.  A month's supply of a product may take up more room that I have available in the cart, car,  refrigerator, freezer, or store cupboard.  Some of this will have to wait. 

Some products are more attractive for stock-up trips: larger sizes of frequently consumed products that are stable (on shelf, in fridge or freezer) and perhaps also with "treats" that can be purchased while there is a little extra money available.

According to the USDA, in 2011,  the average monthly SNAP benefit per household was  $284.   Remember that this is $284 spent on SNAP eligible products only:  leave out  non-food/beverage items, hot foods, ready-to-eat items, alcohol and tobacco.  Can it be done?  Yes, but its going to be tough to fit into one shopping cart or in your car or in your kitchen.   $284 is the monthly benefit for the average household of 2.1 people.  Could a family of 4 realistically buy even most of their food once a month?  Even if the SNAP shopper could buy all their food and beverage  items in one trip, they still need other grocery items, paper goods, cleaning products etc. that takes up additional space. 

Finally, the  countrywide adoption of EBT cards, rather than paper vouchers, means the SNAP shopper can spend as little as they need right now without losing any of their benefits.  (Something the similar WIC program is still working on in most states).

Despite the big spikes in sales we see for some products around SNAP funding dates, the SNAP shopper is not buying all their monthly supplies in one trip.   Some products will be much more responsive to SNAP funding than others because they fit well with the SNAP shopper's trip-type and taste preferences.

So, how do you know if your products are responsive to SNAP funding dates?    If you have access to the payment details by basket it's a slightly simpler process of querying your data and correlating across to SNAP release dates.  If you have daily point of sale data you need to build predictive models against total sales rather than SNAP specific sales (Do you need daily Point of Sale data?).  In either case, you are dealing with very large quantities of data and need the right tools and the knowledge to wield them effectively (Bringing your analytical guns to bear on Big Data, Data handling - the right tool for the job).

If you do not know which products, stores and dates will see spikes in demand how can you ensure product is on-shelf?  Ignoring SNAP may be costing you sales.

If you're ready to get started - call me.

Planning Part V: Manufacturer/Supply Partner Relationships

Ever feel like you're wearing this t-shirt?
 

Manufacturer/Supply Partner Relationships

Stuck in the Middle with You

A quick blast from the past: its 1972, you’re tooling down the road in your dad’s Oldsmobile grooving on Casey Kasem’s American Top 40 Countdown.  As you navigate your way through the A&W parking lot, Casey spins the song soon to be the theme of distributors everywhere, “Stuck in the middle with you”.  And, just like the song says, we in the distributor world are stuck in the middle with our suppliers. This means supply partner planning is every bit as important as customer planning.  And keeping with the lyrics, you may find you're dealing with both clowns and jokers along the way.  Discovering and handling these will contribute to your success in the coming year.

Supplier Stratification

As with customers, the first step in building a plan (and a strategy) comes in understanding the positioning of your suppliers.  I call this supplier stratification.  Fundamentally all suppliers fall into one of 6 categories:

1.      Profit Partners – these are the suppliers who account for day to day profits.  They work closely with your team to grow business today and provide the revenue flow that supports your business.

2.      Strategic for immediate growth – these are suppliers that allow you to produce growth and revenue next year.  Often these are product lines on the periphery of your current sales.  For example, an electrical distributor might produce immediate growth by working with a vendor of electrical safety equipment.  Just a little attention today could produce growth without a great deal of training and positioning.  These will never make your top 10 suppliers, but adding a couple hundred thousand to the top line sale is not a bad thing.  (By the way, I recommend setting a minimum growth amount to make this list.  This varies from company to company but $100K in two years is a good starting point.)

3.      Strategic for long term growth – these are accounts which drive your company into the future.  They stand in place to be major producers sometime in the next 5 years.  As our world changes these manufactures are emerging technologies which position your company over the longer haul.

4.      Customers want them so we keep them around– suppliers that you would like to convert their sales to something else but customers keep asking for the brand.  Some manufacturers have strong brands but employee saturation distribution.  They bring little strategic value to your company, the margins may be low, and they do little to improve your place in the market. 

5.      Line fillers – we all have them.  We take orders for their products but don’t really proactively sell their products.

6.      Don’t know why we have them – do little for us and occupy a small place in our catalog and on our shelves.  We probably would have severed ties but just haven’t gotten around to it.

Understanding the profit picture involves more than just Gross Margin percentage…

Many distributors make the mistake of evaluating their suppliers on gross margin alone.  But the top performers have developed more comprehensive methods for scoring their vendors.  Things like ease of doing routine business, “pull through” of other products, ability to support your efforts and aggressive distributor friendly marketing plans must be taken into consideration.

If you have not already developed a supplier scorecard, you should make this a top priority.  Stay tuned, because we will soon be making our own scorecard available…

Supplier planning is critical

We don’t have time to plan with everyone.  But armed with your new stratified vendor list, it should be obvious who deserves your time and effort. Your plans should include joint marketing activities, focused training, and expanded product launches.  It should also include some very specific product targeting. 

Any plans should include dates, responsibilities, and desired measures of success.  Dates for some kind of formal plan review must be a part of a real working plan. 

If the vendor doesn’t want to join you in real action oriented planning, if they don’t want to carry the burden of their portion of the activities, or if their local team refuses to engage, now is the time to reevaluate their position in your stratified list of supply partners.

Does your sales team know the status of the suppliers?

Strange as it may see, many distributors struggle because their sales team doesn’t know the status of suppliers.  Sometimes they do know but refuse to follow management direction because of personality conflicts with the local team of your best suppliers. 

End of the year planning includes spending time explaining the importance of a unified push into the market.  Some of your “lone ranger” sales types may need more than a pep talk.  I recommend scheduling follow-up meetings on a quarterly basis to insure your market direction is followed. 

There a quite a few more points for the more advanced distributor (we will be publishing a more complete document soon), but armed with this short list you’re on your way to a great end of the year plan.

Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:

http://tinyurl.com/DistributorAnnualPlanning

Frankly Speaking: Automation Fair 2012

Rockwell Automation Fair from the Street Level

I attended Rockwell’s 21^st Automation Fair last week in Philadelphia, and since loads of people are asking, I thought I would share a few thoughts on the fair from a street level perspective.  Over the years I have attended all of the shows but one, so I feel relatively well qualified to comment.

First, in spite of Hurricane Sandy and Northeaster Athena, the attendance was strong.  Rockwell published the first day’s attendance at somewhere between 9,000 -10,000, but it definitely seemed like more.  The booths were packed and the people seemed qualified.  The show started at 8:00 AM and unlike many shows that start off slow – the line had already formed at 7:30 in the morning. 

I saw attendees from virtually every corner of the globe.  This shindig really is a world event.

Secondly, I saw my all-time first planning issue with one of these fairs.  They ran out of cookies at lunch on the first day.  While this is a small matter, it is a first.  You can probably tell I am food oriented because I also noticed this year’s fair included massive piles of donuts.

As in the past, there were tons of cool new products introduced at Automation Fair.  The list is online here:  http://www.rockwellautomation.com/events/automation-fair/press/press-releases.page

My vote to the coolest new things goes to FRABA, with the introduction of a programmable potentiometer for industrial positioning applications.  Here’s why I am excited.  This thing is a drop in replacement for old time positioning pots, but the guts are a magnetic absolute encoder.  It’s programmable without the need for any tools.  For an end user, it eliminates the need to stock multiple replacement units.  For distributors, it allows a single unit to serve as “service stock” for dozens of customers.  Read about it here:  http://www.posital.com/us/products/POSITAL/AbsoluteEncoders/Programmable_Potentiometer_Ind_Datasheet_DataContent.pdf

Finally, the Automation Fair continues to be one of the best automation related showcases in North America.  If you are an automation supplier that doesn’t compete with Rockwell, you should check it out.  For those who do compete with Rockwell, I suggest you build on their model.

SNAP Analytics (1) - Funding and spikes.

Back in August I took a quick look at SNAP, the US government's "Supplemental Nutritional Assistance Program", formerly known as "Food Stamps". (see What's driving your Sales? SNAP?).  

In 2011, approximately 15% of the US population received SNAP benefits that they can spend on most food and beverage items in store.  SNAP funding has doubled in the last 3 years.

SNAP can create large spikes in demand at the store and yet, because of the way these funds are distributed , this is typically hidden from analysts looking at aggregate data. (see Do you need daily Point of Sale data?... )

If you do not know which products, stores and dates will see spikes in demand how can you ensure product is on-shelf?  Ignoring SNAP may be costing you sales.

This is the first in a series of posts covering Analytics around SNAP and opportunities for driving incremental sales.

The table below shows the days of the month (highlighted in red) when each state distributes SNAP funding (click on it to enlarge):

US SNAP funding patterns by state and day of the month.

At the top of the table, we have the States that distribute all their funding on just 1 day of the month. Out of the 54 States, Districts and Territories shown just 10 of these distribute on one day and (thankfully) they are not the ones with the biggest sales. But, if you are selling a SNAP responsive product you will want to ensure you plenty of stock in-store and on-shelf on the first for these states. 

The States are ranked in terms of the impact SNAP distribution is likely to have within each state: the size of the sales "spike". Fewer SNAP distribution days and the spike will be higher. Perhaps less easy to explain but the closer that SNAP distribution days are to each other, the more their shoppers overlap in store and the higher the sales spike. Consequently, Utah with 3 dispersed distribution days may have slightly lower sales "spikes" than New Jersey with 5 distribution days in a single block.

Somewhere along the line between Nevada (ranked #1) and Missouri (ranked #54) SNAP stops mattering to you because the distribution of fund is so dispersed through the month that you see no sales spikes at all.

74% of funding is distributed on 10 days or less and 10 day distribution can still generate, on average, a 20%-40% increase in sales $$. BUT, some products are more responsive to SNAP distribution than others; some stores will have many more than the average 15% of their shoppers eligible for SNAP. So, within the same State expect huge variations in the size of demand spikes. It may not be the average that's causing a problem.

Do you know which products, stores and dates are at risk? If not, how do you know how much demand went unfulfilled?  

next>  SNAP Analytics (2) - Purchase Patterns

What's the biggest supply chain issue for CPG/Retail?

This morning I picked up a post for this blog from Visicom.  In summary

"We asked dozens of retail store managers this week: what’s the biggest issue you are having with product delivery by vendors? Know what they said? The biggest problem for most retailers is out of stock products."

Despite the low, probably unrepresentative sample size (dozens?) I think there is a ring of truth to this, but, is product delivery the biggest supply chain issue for CPG/Retail?  Not even close.


Of course it's a problem if a vendor cannot deliver the goods, particularly if this is to support promotional activity.  A more flexible and responsive supply chain can reduce this problem and it's a worthy goal to improve that capability.

But, the biggest issue with the supply chain is still the replenishment of the shelf from inventory that the store already has.   The one moment of truth that matters is when a shopper is looking for a product: is it there on the shelf?  With store systems typically reporting that they have sufficient inventory to support sales ~99% of the time, why do one-off reports repeatedly show that on-shelf presence is closer to 90% ?

Part of the problem is that measuring on-shelf presence is relatively difficult and expensive because you can't rely on the stores systems to tell you the answer:

A large part of the problem is to do with so called "phantom inventory".  Phantom inventory that appears to be at the store but in reality has been lost to theft, unrecorded damage, sales recorded as another product or perhaps it is literally "lost": it's in the store but if neither you nor the customer can find it, it's as good as useless. 

Whether or not product is on-shelf can also change (easily) within the day.  Measure it late at night after much re-stocking has been done and it may look a lot better than it does at 6:30 pm on a Friday night. 

Even if product is on a shelf, it may not be on the right one or it's effectively removed from sale by having other product placed in front of it, or being out of reach (like individual cans of cat-food at the back of a 4' deep "warehouse" shelf.)  

So, it's difficult to get good numbers of how bad the problem really is but ~90% on-shelf presence seems to be a reasonable estimate.   This ties with my own experience and is born out repeatedly in ad-hoc studies.

A number of companies (RSi, TR3, TrueDemand - now owned by Acosta) have built business on systems that monitor point of sale data and flag to the Retailer/CPG which products appear to be off-shelf at any point so they can rush someone in to fix the problem: find lost inventory, identify phantom inventory, replace lost shelf-tags or just re-organize the shelf so there is room to replenish a product where it is supposed to be on the planogram.   This too is a good idea, but it will never pick up all off-shelf  issues: they require at least multiple days of zero-sales if not weeks to be effectively picked up.

A CPG may feel that this issue is entirely within the store's control but I'm not so sure.   It seem to me that there are any number of things that a CPG could do to make it easier for a retailer to stock shelves effectively.  Here are some hypotheses that I think would be worth testing::

• It's  easier to stock products that fit easily on the shelf: pack-size v.s shelf-space could play a big role.
• 5lb cases get re-stocked more effectively than 45lb cases
• products that are easy to identify in back-room storage are re-stocked more effectively
• whole cases are re-stocked more effectively than cases that must be broken open.
• some shelving fixtures see more off-shelf issues than others
• some package-forms see more off-shelf issues
• some departments routinely have more off-shelf
• planograms are set based on "average" volume but off-shelf issues are driven by peaks in demand (see Do you need daily Point of Sale data?)

Is this the right list?  Probably not: it's certainly incomplete and we would probably find not all of these matter  much to the outcome, but, I do think it's the right approach.  With an appropriate sampling scheme to measure on-shelf presence and some predictive-analytics  we could find (and quantify) what really drives this problem then work to eradicate the root causes to get substantial improvements.

How does 2%-3% more revenue sound to you?  It may not seem like a lot but with typical logistics costs  representing 5%-10% of CPG sales a 3% increase in revenue may well be the biggest thing supply-chain can do to improve the bottom line.

What do you think drives or prevents excessive off-shelf issues?   Or do you think I'm missing the point and there is a bigger issue to be found?  Let me know in the comments section below.

Better Business Reporting in Excel - XLReportGrids 1.0 released

XLReportGrids 1.0 released

XLReportGrids is a FREE, Excel add-in that builds grids of visual reports, from a template, sized to fit the printed page. 

Templates are just a range of cells in a worksheet that are driven by a pivot-table. Build templates with: charts, formulas, images, pivot-tables, text boxes, anything that can be added to a worksheet.

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Mathematical Tables

By Admin

Uploaded content: Mathematical Tables (Present Value and Future Value Tables)

The tables below are extremely useful especially for finance and accounting students. They are often used to find either the present value or the future value of money. Some academic topics like time value of money and capital budgeting will frequently use these tables to ease calculation purposes. It is highly recommended if you are using all or any one of these, please download it and adjust the picture until it fits into an A4 sized paper before you print it. Also, please keep it nicely for future usage purpose.

Future Value Interest Factors (FVIF) Table 

Future Value Interest Factors Annuity (FVIFA) Table

Present Value Interest Factors (PVIF) Table

Present Value Interest Factors Annuity (PVIFA) Table