June 16, 2021
Navigating the current supply chain crisis requires adaptability - and intelligent math. Jason’s friend and business partner Marshall Jones asks the questions this time around as the pair chat real-time challenges and opportunities. Jason’s simple equation for calculating customer profitability coupled with his tips for strengthening the relationships that matter will help distributors avoid costly missteps well into the future.
“History does have a good strong track record of giving us, in normal times, a very good prediction of what to buy for our needs,” says Marshall before delivering a caveat. “In uncertain times like this, it's not as valuable.”
The last 15 months have served up more surprises than the previous fifty. That’s prompted even the most conservative distributors to panic. So, how can they adjust their systems to deal with ongoing uncertainties in the marketplace, and what should they be doing to protect themselves, to hedge against being the distributor with too much stock? Well…
“I think this is kind of a tough intestinal fortitude-type of behavior that folks are going to have to take a hard look at. In other words, allocating product to the very best customers that you have,” says Jason, noting that manufacturers have played the allocation game for years; it’s an easy, effective, and immediate quantification of a distributor’s most desirable customers over time. Those who don’t measure up are simply taking away gross margin dollars from those profitable customers’ contributions.
Customers are only one side of the calculation; suppliers occupy the other. As the world reclaims its footing, distributors that show a willingness to share more information with their core suppliers can gain momentum faster. “If you are a collaborator with these folks,” Jason says, “you are going to see, possibly, your orders getting filled more often.” At some point, the bottleneck will loosen. Proper crisis management now can create competitive advantages for distributors in the future.
Find Jason’s net profitability exercise at Distributor Power Tools: Customer Profitability.
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Distribution Talk is produced by The Distribution Team, a consulting services firm dedicated to helping wholesale distribution clients remove barriers to profitability, generate wealth and achieve personal goals.
This episode was edited & mixed by The Creative Impostor Studios.
Special thanks to our sponsor for this episode: HMI Performance Incentives, providing innovative, data-driven B2B incentive solutions.