Posts Tagged ‘National Association of Wholesaler-Distributors’
Al Bates and Dispelling “Profit Myths”
Tuesday, November 25th, 2008
Al Bates spent almost 25 years being wrong before he turned himself right. In fact, he admits that as a University of Colorado professor, he even passed along incorrect business strategies to his students.
What he was passing along seemed to be common sense: Attack new accounts, because they only bring incremental volume and their margin goes “straight to the bottom line.” Tighten restrictions on credit to offset even a small bad debt loss. But years later, with his own research and executive educational firm, he found data that seemed to dispel all he had learned and taught.
Gee, that doesn’t seem to make any sense , he thought. That doesn’t look like it’s right. Maybe it’s wrong, an urban legend – a myth.
His findings became Profit Myths in Wholesale Distribution: The Truth About Sales, Margins, Inventory, and Expenses. To businesses the book bestows a mission: "challenge that conventional wisdom," as Bates said. "Do not just keep doing things because that’s the only way we’ve learned things have been done.”
The book uses a hypothetical firm to explain how his rather unconventional wisdom can actually better anyone’s business.
“People seem to be able to identify and understand when they can see actual number spelled out on the page,” Bates said. “They’ll understand how this change was made and how other things apply to their own firms.”
Bates founded his firm, Profit Planning Group, in 1985. Since then, they have released financial benchmarking reports for over 100 associations, almost half of them being wholesaler-distributors. The more reports the firm compiled, the more Bates saw common teachings become “profit myths,” across industries.
“The book is based on being wrong for a long time,” he said, later adding. “I don’t want to jump on anyone – but every consultant has their own area of knowledge, their own view of life. They get to believing things simply because they believe them.”
For example, Bates advises against lowering inventory and accounts receivable in times of a recession. He found that companies that did saw little impact on their profitability and received more complaints. Bates recommends that such companies poll their customers instead and ask what they could do better.
As a result, “one of the common findings for distributors when they ask customers, ‘What would you like us to do better?’ – is, it almost always comes down to, ‘I would like you to be in stock more often,” he said.
Bates spent five to six years writing the book, and has since heard criticism as well as praise. But especially in the wholesale-distribution industry – where “decision-making is dispersed throughout the organization,” as he wrote – Bates hopes that he can take a lot of guesswork behind future business innovation.
“Distributors spend all of their time running their businesses,” he said. “They don’t have any time left over to step back and say, ‘What’s right and what’s wrong?’”
For more information on Bates’ book, visit http://www.naw.org.
Tags: Al Bates, boost profits, christina lee, National Association of Wholesaler-Distributors, Profit Myths in Wholesale Distribution, Profit Planning Group, wholesale distribution
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Save the Date: NAW’s 2009 Executive Summit
Thursday, November 20th, 2008
As the economic slowdown creates all-time lows, business owners fear that the upcoming fiscal year may become a recurring nightmare. But what one association wants to prove is that wholesaler-distributors can fare well at any time, even under the direst of conditions.
The National Association of Wholesaler-Distributors’ upcoming executive summit – subtitled “Profiting Despite the Difficult Economy” – will present expert opinions regarding business relationships and optimization of sales and marketing during tough times. Alan Beaulieu, Institute for Trend Research president, will also present an economic forecast and list of recommended actions for 2009.
“The program is determined by what our members tell us they’d like to hear about and learn about,” said Joy Goldman, summit coordinator and director of administration.
Also lined up for the summit are David Nour (The Nour Group), David Griffith (Modern Group Ltd.), F. Barry Lawrence (Texas A&M University), and Bruce Roby (Wilson).
The executive summit – at Fairmont Washington in the District, Jan. 27-29 – costs $1,075-$1,645 before Jan. 2; and $1,180-$1,745 after. For more information, call 202-872-0885 or visit www.naw.org .
Tags: christina lee, economic downturn, Executive Summit, Joy Goldman, National Association of Wholesaler-Distributors
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Q&A: NAW’s Jade West
Monday, November 17th, 2008
For business executives, a new administration could bring a new laundry list of concerns to present. But Jade West, National Association of Wholesaler-Distributors senior vice president of government relations, found instead that executives and business owners will press lingering issues first to Congress:
- Possible implementation of the Employment Free Choice Act: Union workers would be allowed to ask company employees to publicly sign a card stating their support of unionizing. Advocates argue that the act – also known as the card check bill – will make organizing unions easier, while opposition emphasizes its potential to eliminate the secret ballot.
- Expansion of the Family Medical Leave Act: Businesses with 50 or more employees must grant to each up to 12 workweeks of unpaid leave a year, for the care of newborns, adopted children, or immediate family members. President-elect Barack Obama wants to expand regulations by applying the act to all businesses with 25 or more employees. Opposition argues that this expansion, along with other proposed regulations, would simply cost small businesses too much.
- Potential elimination of “last-in, first-out”: With “last-in, first-out” accounting, companies subtract the cost of the latest addition to their inventory from the cost of the last item sold – ultimately, raising their costs while lowering their taxable income. Both Obama and the association support its use, while the House Ways and Means Committee proposed repealing the practice in October 2007.
West talked with goWholesale about what rose to discussion last week in Chicago, as she interpreted the presidential election results to the association’s Billion Dollar Company Roundtables. Edited responses follow.
gW: In your opinion, what is Congress going to address first?
JW: I think the president-elect is gonna have to deal with the fiscal crisis first. Congress is going to inspire talking about spending by way of stimulus bills, and is going to have to clear with the Detroit bailout probably as early as this week in the lame duck session.
Past the immediate need to deal with those issues – the fiscal crunch and the credit crunch – I would not be surprised to see organized labor push aggressively for the Employment Free Choice Act bill. There is a different environment for this bill this year than in 2007. Organized labor is committed to getting it done, while the public opinion is against it, 80-20. It is going to be a challenging issue for Democrats and the Obama administration, but organized labor and labor unions want it to be the first thing on the agenda.
gW: Was there any issue the roundtable brought up that surprised you?
JW: There weren’t any real surprises. Executives were all concerned with the labor issues: both the card check issue and the Family Medical Leave Act, health care reform, the Fair Labor Standards Act. Those interests of the members and executives did not surprise me at all. Such workplace mandates would impose financial burdens on companies already dealing with a slowing economy.
gW: What advice did you give to the roundtable to prepare for what you think Congress is going to do?
JW: On the political side, what we request – to [executives], from us – is to stay engaged and stay prepared. Every member of Congress receiving responses from voters is trying to vote in a way that they believe in the best interest of the country. Organized labor is certainly out there doing big lobbying for these bills.
Let them know how they’ll be impacted by the bills, because only the businesses can tell. Nobody can tell the story better than the guy actually running the business asking, “How can you do this to me? If you raise taxes, impose these mandates, require that I increase medical leave … it will cost me money. And for every dollar that I have to spend accommodating to government mandates or regulation, is money that I can’t spend on expansion, on hiring, on reinvestment.”
There exists a finite number of dollars – whether a business is big or small – that if spent other than for best interest of the company and employees, is money not well spent. …
The profit margin of wholesale-distribution is so small – they’re not taking 10 to 15 percent profit even in a good year. So if you start eroding a 1 to 2 percent margin in which most work, you can affect not just bottom-line margins but profitability across the board.
gW: What are the next big issues NAW will address?
JW: The card check and LIFO – “last in, first out.” Those two are issues that the industry is hugely concerned about, with LIFO on tax side, and the card check and its effects on everyone at the workplace.
Tags: billion dollar company roundtable, christina lee, events, Jade West, National Association of Wholesaler-Distributors
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How I Did It: Creating a Sales Model That Consistently Works
Wednesday, November 5th, 2008
More than 37 years of working in the wholesale industry taught Gary Moore a number of strategies in closing sales. But even after less than a third of those years passed, he had already seen too many bad sales attempts but could not find one consistent, applicable solution.
One day in his Denver office, he began thinking about factors that complicate the sales process, then began scrawling on paper how all the key lessons he had learned summed up to one effective sales technique.
“Really, it came after seeing a bunch of sales attempts, and even some good ones — but I hadn’t seen anyone really codify it,” Moore said. “I wanted to really organize it in a way so that people could remember.”
Over 400 wholesale distributors outside of the material handling industry have since approved what was once just a “crude drawing,” in Moore’s words. His idea transformed into a sales model that he still teaches today, which became the basis of “Objective-Based Selling in Wholesale-Distribution: Four Keys to Selling More at Higher Gross Margins.”
The National Association of Wholesaler-Distributors published the latest version of his book last month, though the sales model itself has not changed much since its creation in 1990, Moore said. For more than ten years, Moore taught and received feedback of his lessons from other companies, before he began teaching full-time in 2006.
Overall, the Objective-Based Sales Model teaches salespeople to build a more personalized relationship with their customers. One key lesson Moore teaches salespeople is to ask open-ended questions, which should bring up a number of possibilities for a sale.
“The advantage to this is that it makes the salesman shut up and lets the customer talk — and then the customer will tell you how to sell them,” Moore said.
Based on what they learn of the customer, Moore then teaches salespeople to pass along a written proposal that provides a number of possible ways the company can serve the customer.
“Taking a product and jamming it into a customer’s throat is never really effective,” he said.
Before readers even delve into the Objective-Based Selling Model in Moore’s book, they should first come across a disclaimer: “This book respects selling as a profession and salespeople as professionals.”
“Like other professions, there is a body of knowledge that forms the structure of techniques and skills that are most effective,” Moore writes. “These are practiced in customized ways by individuals with differing levels of effectiveness, based on their knowledge, the unique talents they bring to the profession, their circumstances, their work ethic.”
For more information about Moore’s book, visit www.objectivebasedselling.net .
Tags: books, christina lee, Gary Moore, National Association of Wholesaler-Distributors, Objective-Based Selling Model
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Save the Date: 2009 Economic Forecast for Wholesale Distribution
Monday, November 3rd, 2008
Despite the weak economic environment, the wholesale distribution industry may see over the next eight months a 14.0 percent rise in revenue. But within that growth, Dr. Adam Fein also foresees the most variation between sectors that has been seen in five years.
Such predictions, plus an overall unfavorable outlook of next year, will shape Fein’s “2009 Economic Forecast for Wholesale Distribution” Webcast. On November 13, he invites industry executives and others to hear his macroeconomic and business-to-business outlooks, while also addressing the futures of 19 wholesale-distribution sectors.
Fein is the founder and president of Pembroke Consulting, a management advisory and business research firm. He also serves as the first fellow for the National Association of Wholesaler-Distributors.
The Webcast, airing at 2 p.m. Eastern Standard Time, costs $79 for registration and a complimentary written report. For more information, call 303-443-5060 or visit www.mdm.com/2009forecast.
Tags: Adam Fein, christina lee, economic crisis, National Association of Wholesaler-Distributors, Pembroke Consulting, webcast
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Save the Date: NAW’s Billion Dollar Company CFO Roundtable
Friday, October 24th, 2008
Wholesaler-distributors need not approach November with questions of their financial wellbeing. Instead, they can turn to the National Association of Wholesaler-Distributors‘ next billion dollar company roundtable at the Hilton Chicago O’Hare Airport, November 10 to 11.
Association members from 22 distribution companies have already registered to hear what top chief financial executives expect next month. Among them will be JPMorgan Chase’s senior vice-president Peter Connolly and vice-president Patrick Fravel, who will present solutions banks are providing to wholesaler-distributors post-commercial banking crisis.
Jade West, the association’s senior vice-president of government relations, will also open the roundtable’s second day to discuss what the presidential election results could mean for wholesaler-distributors.
“It’s really the only place I know of that CFOs of wholesaler-distributors at a billion-dollar level can really get together like this,” said Dana Neill, the association’s director of member services. “You may find something like this for other industries, but this is probably the only place solely for wholesaler-distributors.”
For more information, call 202-872-0885 or visit www.naw.org.
Tags: billion dollar company roundtable, christina lee, Dana Neill, Jade West, National Association of Wholesaler-Distributors
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Q&A: How Will the Bailout Plan Affect Wholesalers?
Thursday, October 23rd, 2008
Q: How will the bailout plan affect wholesalers?
A: Financial suffering is bound to trickle down the supply chain because of unstable credit conditions. As a result, “many wholesale distributors will be affected by the government’s efforts to stabilize the credit markets,” said Brent Grover, managing partner at Evergreen Consulting and National Association of Wholesaler-Distributors author (“Official Guide to Wholesaler-Distributor Success”).
The extent of that effect depends upon how quickly the government can stabilize the banking system. Because of economic times like these, the bailout plan – or, the Emergency Economic Stabilization Act of 2008 – implemented discount rates to the costs of both purchasing and insuring troubled financial institutions, as once defined by the Federal Credit Reform Act of 1990.
Distributors typically have two primary sources of financing: supplier credit, or how much self-financing goes into company operations; and bank credit, or how much a company borrows through either credits or loans. A typical distribution business usually borrows 30 to 60 percent of its capital, or total amount of financial resources available, according to Grover.
Such a business still has to consider then how interest rates can rise and how the availability of credit can fall. For a distributor, weakened suppliers and apprehensive customers “can be dangerous to deal with,” Grover said, for all can suffer from decreases in sales and profits.
With this, highly-leveraged companies – or those with a heavy use of bank credit – may also struggle to make regular payments back to banks. Add struggling banks into that relationship, and “the problem is exacerbated,” Grover said.
In sum, “the government’s efforts to stabilize the banking system, if successful, will bring a great deal of relief to the customers of those banks,” as Grover said.
Of course, how quickly these efforts will be made has yet to be determined. But with the determination amongst the administration and Congress, as the Wall Street Journal’s David Stout wrote last month, “while a couple of venerable investment banks could fade into oblivion or be absorbed by mergers, the entire financial system could not be allowed to collapse.”
Tags: bailout plan, Brent Grover, christina lee, economic crisis, Emergency Economic Stablization Act of 2008, Evergreen Consulting, National Association of Wholesaler-Distributors, wholesale distribution
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How To: Go Lean in Distribution
Thursday, October 9th, 2008
As some sort of business nutritionist, Dr. Perry Daneshgari has prescribed to over 300 companies a diet of lean operations – cutting out wasteful activities that drive up internal costs. More than ten years after he founded his company, MCA Inc. , distributors are finally catching on and demanding to know how they can also cut that “fat.”
In a phone interview, he shared wih goWholesale a few of his lessons:
Managing inventory is becoming more crucial than having it. Distributors recognize that bottom lines are disappearing, because they’re carrying more inventory. To reduce cost of inventory, you need to make sure you turn over your inventory faster. So the lean approach is, try to improve inventory time to reduce costs.
Bottom line, operation costs need the most improvement. Most distributions pretty much have a fixed growth margin, as that is determined by the market. But they can control their operation costs, by improving inventory, improving shipping.
A typical problem we see is in the warehouse layout or inventory management. Typical distributors would lay out their warehouse not necessarily based on what customers order. Even if they have any of what they call ABC items – fast-moving – they organize based on line item. Customers don’t buy based on line items; they buy based on their order.
At a grocery store, you just don’t buy a jar of jam or a loaf of bread. You usually have an order in mind, whether you are going to shop for food, or if you are going to shop for a party.
If a warehouse is optimized for receiving, then naturally the picking suffers. If there’s a lot of time you’re spending on picking the items, then you’re spending a smaller amount on inventory movement.
The most important concept that lean is really based on, is that the customer’s input has to drive your operations. A company’s entire operations has to be designed, greased, and pointed toward only what the customer wants.
You should not worry as much about your competitors, because that is really secondary to what the customer wants. Until the customer buys stuff from you, you have nothing.
Really, you have to go from cost-based pricing to price-based costing. You have to see what the customer is willing to pay, and then think about how much profit you’re willing to make. …
Historically, distributors would take their costs, which include overhead costs and costs of material, and then they add a profit or gross margin to it. In order to win over customers, they reduce the price, but they still work with the gross margin. For example, if you buy an item for $100 and you’re at $50 in overhead costs, you have sell that item for at least $160 to make money, right? That’s cost-based pricing.
Price-based costing says, the market is not going to pay $160, the market is going to pay $155 – but I still want to make 10 percent. The material cost is $100, but the area I have to work on is my own cost: inventory, people, how I deal with my money.
For more information, wholesale-distributors can turn to the newly released “Lean Operations of Wholesale Distribution ,” which Daneshgari co-wrote with MCA’s Director of Research Michelle Wilson for the National Association of Wholesaler-Distributors.
Tags: christina lee, lean operations, MCA Inc., National Association of Wholesaler-Distributors, Perry Daneshgari, wholesale distribution
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