Get noticed by customers

Innovators find ways to stand out in a crowded marketplace

by Steve Epner, STAFDA Technology Consultant

Innovators are always finding ways to be better and different from the competition. They stand for something or do things in a recognizable way. You can be an innovator – actually, you need to be an innovator – if you want to be at the top of your industry.

Innovating does not mean inventing a new product. An invention may be an innovation, but not all innovations are inventions. Innovations can be found in different ways of processing work. They can be found in new ways for pricing. One can even innovate in relationships and how you deal with trading partners.

Once, “everyday low prices” was an innovation that helped some retailers stand out. Today, it is often a “me too” proposition. Everyone tries it, but few can sustain it or make it profitable in the long run.

That is unless you innovate. For example, an extremely large buyer can get lower costs for product. But, unless they run a tight warehouse, the extra margin may be eaten up by inefficient procedures, excessive inventory costs and losses due to theft, damage and shipping inaccuracies. Making it all work requires innovation in all of the organization’s processes.

Even when you do pay the same costs as everyone else, lower pricing (that can be sustained) means you must be more efficient (it costs you less to receive, store, sell and ship product) and/or you are willing to live on a smaller margin. It sounds easy, but in reality it takes a great deal of effort, best practices and finding new ways to do old operations.

There are many ways to look at the issue and many more potential solutions. Here are a few examples.

Innovative examples
One innovation that will go a long way is changing culture. Culture covers everything from the time most people get into the office to the clothes they wear. Culture affects how people manage and interact with customers or clients.

In many companies, the culture seems to insist that the sales force give away any reductions in acquisition cost in the form of a reduced price to the customer. Often, they believe every other competitor was given the same discount, so we better pass it along first!

Here is an innovative idea: keep some of what you save. There is no rule that says you have to pass it on. It is also true that not everyone will get the same discount. Even more importantly, there is nothing wrong with making a larger profit. We all need a good return to continue to take the risk of operating a business.

One company books special savings into a general ledger account that is used as one measure of the purchasing department. This number cannot be seen by sales and is used to distribute special bonuses to purchasing for doing a great job.

Another firm focuses on high service levels, which means being able to fill any order that comes in the door. The problem is, the cost to keep all of that “just-in-case” stock is getting too high to support. Their long-term success was built on this simple principle, so what do they do?

Collaboration between trading partners is an innovation that will work in this situation. EDI was the first incarnation. Now there are many different ways, such as integrated programs like vendor- and distributor-managed inventory. Collaborative forecasting can deliver amazing results. Combine this with better metrics to make sure the stock on hand is the right stock, and you are ready to change the details, not your reputation.

High service levels are a good idea, but you can’t afford to be everything to everybody. Pick your targets. Pick your markets. Pick your best customers. Evaluate your customers, then focus on those that make you the most profit.

Using advanced mathematical techniques, you can have almost the right inventory almost all of the time for a fraction of the cost of having everything all of the time. With proper tools and process, you will never miss an A item for an A customer.

In the event you cannot find a D item for a D customer, don’t let it ruin your day. Proper analysis will reveal where your profit comes from and help you adjust your inventory to take care of your best customers.

These are simple examples. There are many more. Take time to analyze what is really happening and then use your innate talents and innovate. Anyone can, survivors do.

This article originally appeared in the 2008 STAFDA issue of Progressive Distributor. Copyright 2008.

back to top                back to Distribution Management archives