Strategic insight kernels, seeds of knowledge distributors can use to grow new profits, aren’t always easy to find, according to wholesale distribution consultant Bruce Merrifield in a recent message to distributors. But when these insights are discovered and acted on, the bottom-line impact can be worth the search. (Read Merrifield’s message here.)
Merrifield says strategic insights hide in at least two places. One is within businesses, where distributors can find “the root causes for why a small percent of your customers and items are super net-profitable or unprofitable.” To identify these root causes, Merrifield recommends a cost-to-serve analysis to uncover line-item net-profit information. Companies can then follow Merrifield’s eight-step process to reinvigorate that core business.
Seeds of strategic insight can also be found externally, Merrifield says. He advises companies to look to the top 4 percent of the most innovative customers and suppliers in their channels to discover opportunities the competition has found and learn how they’re capitalizing on them.
One way to get to this information is to maintain open communication with suppliers, something Brent Grover recommends in his recent book on strategic planning. Suppliers, he says, have excellent insights into coming marketplace changes.
“Savvy supplier sales reps pick up signals about the shifting marketplace from their conversations with distributor managers and sales reps, as well as from end-user visits,” he says. Isolated examples of what companies are doing can provide a clue as to what other manufacturers or distributors may be planning to do elsewhere.