By Jason Bader
Mining data for information is nothing new. A hot topic right now is the analysis of data and how reporting can help make better management decisions. The beauty of this analysis is that the data is already being readily accumulated by your software package. It accumulates information about your customer’s buying habits 2/7. There is no shortage of information to dig into: Every sales order tells something about the buying preferences of the customer. Do they prefer bulk or packaged quantities? Do they prefer import vs. domestic brands? Do they treat you as a one stop shop or a niche player for specialty items? All of this can be gleaned by dipping your net in the data stream.
There are several ways to start your fishing expedition. First, start by learning about the reporting capabilities built into the software package you already own. Reporting modules are one of the most underutilized tools in any software package.
If the tools at your disposal are fairly inadequate, fear not. There are several low-cost solutions that can help you build management worthy documents. (Crystal Reports has been an old standby used by IT professionals for the last two decades. I am sure that there are several other basic, economical report writers that will allow you to extract information and put it into a meaningful format.)
For those ready to take on the challenge, there are several more sophisticated reporting packages out there. They are often referred to as “business intelligence” software. Again, many ERP providers offer these packages as an optional module, which really isn’t a bad option. (If the ERP owns the package, they will generally be able to support it and you will experience less arguing between two different software providers.) Beyond this, there are many tried-and-true third party packages that provide sophisticated visual elements like dashboards or executive indicators.
There are also hybrid package on the market. Although they bill themselves as CRM packages, many of the stronger offerings provide a dual function. Not only are they robust CRM systems, they also offer very solid business intelligence tools.
Of course, behind every good data extraction program is someone who can manipulate the data, so rather than add one more purchasing agent to the staff as business increases, consider investing in a data analyst.
What’s the purpose?
Now that we have covered the how, equally important is the why. What is the purpose behind investing in data analysis? Getting a better return on your technology investment is one really good justification. Most distributors use less than 20% of the capability of their ERP. Compared to the percentage of the package that was paid for, the math isn’t really working out in their favor. We all have a finite amount of money to invest in the business. Given that reality, we should be doing everything in our power to maximize the ROI.
Here’s are some other reasons why:
1. Branch managers never have enough space in their warehouses—and chances are, they just have too much of the wrong product on the shelves. Studying data will help that manager adjust the stocking levels to be better in tune with the current needs of their customers. They will be able to spot products on the decline and be able to make better decisions when allocating space. The customers are telling you what they want you to stock. You just need the right instrument to hear them.
2. Many distributors have very low line counts per order. The average is certainly lower than most sales people think. (I am referring to the average lines on a typical sales order.) Low line counts run up transactional costs for both the distributor and the customer. Frankly, customer service is diminished when a distributors fails to provide all the product a customer needs in an application. A simple study of data and pattern recognition will help the distributor bring this challenge to light. Once recognized, the company can set goals for improvement.
3. Margin improvement is not possible without solid access to sales data. In fact, there is a strong correlation between the success of any margin enhancement program and the access to solid reporting. Reminding salespeople how valuable their services are is key, but it needs to be followed up with a program designed to raise prices on less sensitive items. While some folks claim to be dialed in to the sensitivity of their product mix, I have a hard time believing that you can really know how high to set the bar on 5,000 active SKUs.
The ability to extract transactional data and put it into a meaningful format is one of the best ways to drive net profit. Building reports is only the first step. Progress occurs when we analyze this information and take management action.
Now get up, go walk down the hall, knock on the door of your IT manager—and find out just how much your system could be telling you.
Jason Bader is the managing partner of The Distribution Team, a firm that specializes in helping distributors become more profitable through strategic planning and operating efficiencies. The first 20 years of his career were spent working as a distribution executive. Today, he is a regular speaker at industry events and spends much of his time coaching individual distribution companies. For more information, call 503-282-2333 or contact him by e-mail at Jason@Distributionteam.com. Also visit The Distribution Team’s website at www.thedistributionteam.com.