Executive Session on Distributor Competitive Advantage Creating Competitive Advantage Through Education REGISTER NOW! http://id.tamu.edu
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Fermier Hall, MS 3367Texas A&M University
College Station, TX 77840-3367Phone: 979-845-4984
Fax: 979-845-4980http://id.tamu.edu
Phone: 979-845-4984 / 866-
260-2463 Fax: 979-845-4980http://readcenter.tamu.edu
Executive Session on Distributor Competitive Advantage
Creating Competitive Advantage Through Education
“‘Customer Stratification’ has the power to enable us to trans-form our company from being product-driven to customer- driven. It has helped us understand our customers in greater detail, enabling us to optimize our selling resources, which will result in an improved ROI.”
Don Schalk, President and COO, C.H. Briggs Company
“Given the complexity of pricing, the Texas A&M Pricing Optimization program has gone a long way to specifying all the relevant elements and more importantly putting them in terms that can be quantified and managed. A&M can help you understand the variables and the math of distribution pricing. Don’t get on the phone without them”
Lawrence Mohr, Ph. D., Senior Vice President (retired), F.W. Webb Company
RegiSTeR Now!http://id.tamu.edu
Optimizing Distributor ProfitabilityBest Practices to a Stronger Bottom Line
F. Barry Lawrence • Senthil Gunasekaran • Pradip Krishnadevarajan
“Today’s competitive environment requires that management make better data-driven decisions. Sales and Marketing Optimization will map for you the process to make better, informed decisions. We can no longer afford to treat the sales process as an art; it requires a structured approach and this publication will provide you with the tools to accomplish that in your organization.”
Joseph Nettemeyer, President and CEO, Valin Corporation
Business Processes Process Metrics Finance Elements Financial Drivers
DISTRIBUTOR PROFITABILITY FRAMEWORKLinking Business Processes and Shareholder Value
STORE
SELL
SHIP
SUPPLYCHAIN
PLANNING
SUPPORTSERVICES
SOURCE
STOCK
Gross Margin
Days Payables Outstanding
Cash-to-Cash Cycle Time
Working Capital
Inventory Turnover
GMROII
Total Asset Turnover
Revenue Growth
Cash-to-Cash Cycle Time
Working Capital
Inventory Turnover
GMROII
Total Asset Turnover
Revenue Growth
Gross Margin
BUSINES
S
PROCESSES
SHAREHOLDER
VALUE
SHAREHOLDER VALUE
GROWTH PROFITABILITY ASSETEFFICIENCY
CASHFLOW
BUSINESSPROCESSES
FINANCIALDRIVERS
SOURCE STOCK STORE SELL SHIP
SUPPLY CHAIN PLANNING
SUPPORT SERVICES
Days Sales Outstanding
Gross Margin
Total Asset Turnover
Revenue Growth
EBITDA
Supplier Management(Strategic Sourcing)
Fleet Management
Dispatch Management
3PL / Carrier Management
Customer Order Fulfillment
Sales Management
Pricing Management
Marketing Management
Warehouse Fulfillment (Inbound)
Warehouse Management
Inventory Management
Supply Chain Optimization
Information Technology
Finance Management
Human Resource Management
Product ReceivingProduct Put-Away
Product PlacementLocation TypeLocation IdentificationProduct Storage
Cycle Counting
Sales Force StratificationMapping Customers and Sales ForceSales Compensation Techniques
Customer StratificationCost-to-Serve AssessmentNew Customer Identification
Pricing Optimization
Voice of Customer Market Selection and Target Strategy
Fleet Capacity ManagementFleet Cost Assessment
Routing OptimizationLoading Optimization
Carrier Selection and Performance
Product PickingOrder Delivery
New Facility Location
Network OptimizationResource and Asset Alignment(Supplier - Inventory - Customer)Service Level Optimization
System Integration
Credit Management
Change Management
Recruitment and RetentionAttrition
Total Landed Cost
Payment Terms
Quality and Flexibility
Lead Time and Variability
Fill Rate
Growth Potential
Data Integrity
Invoice Accuracy
Past Due Tracking Efficiency
Training Effectiveness (Benefit-to-Cost Ratio)
Time and Cost-to-Hire
Retention Rate
Accuracy and Efficiency
Space Utilization
Item and Location Accuracy
Sales Force Mix
Customer Mix
Cost-to-Serve and Right Price
Time-to-Market
Qualified Leads Per Marketing Activity
Asset Utilization
On-Time Delivery
Accuracy and Efficiency
Cost of Goods Sold
Accounts Payable
Inventory
Revenue
Inventory
Revenue
Cost of Goods Sold
Accounts Receivable
Revenue
Marketing Expenses (Payroll, Promotion, Media)
Fixed Assets (Plant, Property, Equipment)
Transportation Expenses
Warehouse Payroll
Revenue
GROWTH
PROFITABILITY
CASH FLOW
Total Asset Turnover
Working Capital
Inventory Turnover
EBITDA
Revenue Growth
Working Capital
Days Sales Outstanding
Accounts Receivable Turnover
EBITDA
Revenue Growth
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
Supplier SelectionSupplier PerformanceSupplier StratificationSupplier RelationshipRight Number of Suppliers
Inventory Stratification
What to Forecast?Demand ClassificationForecasting Method
When to Order? (Reorder Point)How Much to Order? (Order Quantity)Replenishment Policy
Inventory Mix
Forecast Accuracy
Fill Rate
Total Landed Cost
Revenue
Warehouse Payroll
Warehouse Rent
Inventory Write-Off
Total Asset Turnover
Revenue Growth
EBITDA
Total Asset Turnover
EBITDA
Revenue Growth
Fixed Assets (Plant, Property, Equipment)
Inventory
Operating Expenses (Transportation and Warehouse)
Revenue
Inventory
Accounts Receivable
Additional IT Expenses
Bad Debt (Write-Offs)
Hiring and Training Cost
Revenue
Optimal Network Location
Optimal Resource Deployment
Optimal Service Level
www.naw.org/crdcwww.nawpubs.org http://supplychain.tamu.edu
© 2008 Supply Chain Systems Laboratory, Texas A&M University
GENERATING GROWTH - BEST PRACTICESHow do we generate growth opportunities?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.eduwww.nawpubs.org
MetricsGrowth Strategy Best Practices
LEVERAGEAccount Penetration - Existing customers
GrowthMechanism
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
PENETRATEMarket penetration - New Customers
BROADENNew Products and Services
ADDSales & Marketing Channels
REACH OUTGeography
EXPANDMarket Segments
BUILDNew Platform (multiple drivers)
INNOVATEValue Proposition Innovation
DIVERSIFYLine of Trade & Value Chain Function
GROWTHDRIVERS
IndustryDynamics
CustomerRelationships
SupplierRelationships
Sales &MarketingStrategy
Sales ForceEffectiveness
Account gap analysisCustomer stratificationSales force effectivenessRetention strategyValue proposition update
Market gap analysisSupplier collaborationCompetitive value propositionSales force performance managementSelling process
Growth mapping core customer andstrategic supplierIndustry trends analysisCompetitive analysis
Customer feedbackPain point analysisGrowth mapping core customer and strategic supplierProduct & service portfolio management
Market mappingTechnology developmentsCustomer need/convenience
Market mappingIndustry trends analysisCompetitive analysis
Growth mapping core customer andstrategic supplierMapping key competitorsSupply chain network optimization
Market segmentationSupplier growth inputsCompetitive analysisIndustry trends analysis
Customer feedbackSupplier inputsValue chain analysisCross-industry best practices
Core customer retention rateCore customer conversion rateShare of walletBalance revenue reliance (risk)
New customer acquisition rateRevenue from new (core) customersNew customer retention rate
Growth pipeline run rateGrowth from new platformsChange in competitive advantage
Growth from new products and services Value proposition leverageBalance over-dependency
Growth from new channelsChange in competitive advantage
Change in competitive advantageRisk managementGrowth from diversification
Growth from new territories Value proposition leverage(national accounts)
Growth from new market segmentsDegree of variety in end markets(risk factors)
Number of innovative effortsGrowth from innovate opportunitiesChange in competitive advantage
OrganicDevelopment
Acquisition
Merger
Strategic Alliance
Growth Drivers
© 2011 Global Supply Chain Laboratory
MANAGING GROWTH - BEST PRACTICESHow do we manage profitability while growing?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Profitability Drivers ProcessGroups Growth ForcesGrowth Challenges Best Practices
Supplier proliferationProduct mix Supplier's channel strategyChannel power balanceChannel visibility
Competency GapTalent attractivenessTechnology and applications infrastructureLeadership gapLack of coordination, control & synergiesOrganizational mobility
Margin pressure from growing customersLack of pricing strategy (value proposition)Competency gapLack of support toolsSub-optimal market mix
SKU proliferationProduct portfolio / mixCost Vs service trade-offFill rate challengesSupplier performance
Sales force capacity vs customer coverageLack of sales-support productivity toolsMisaligned sales force incentives
Warehouse capacityOperating cost challengesCustomer service (accuracy & efficiency)
Ownership typeAccess to growth fundingInvestor attractiveness
Transportation capacityTransportation cost (routing & cubing / loading)Customer service (on-time delivery)
Credit requests from growing customers“New Normal” challenges
Credit, return and rebate policies forproduct expansion growth strategies
Supplier stratification & relationship strategyOptimizing channel compensationChannel growth strategy alignmentLeverage supplier performance
Customer stratificationPricing optimizationIn-built mechanism for early warningsActive adaptation of value propositionMarket segmentation
Inventory stratificationFocused forecastingDynamic replenishmentInventory network optimizationCompetency development
Sales force size & structureSales force productivity (support tools)Sales force compensationAligning customer, company and sales force
Operations (inbound & outbound) productivity - LeanEconomy of scaleBest practices sharingInternal benchmarking
Human capital developmentInformation capital readinessStrategic awareness and alignmentCustomer-centricGrowth mindset Creative leadershipStrategy & structure match
Financial fitness through free cash flow andoperating productivityInvestor confidence
Routing and loading optimizationEconomy of scaleSupply chain network optimization (Transportation vs Inventory)
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
Customized terms based on customer stratificationIn-built mechanism for early warningsActive adaptation of value proposition
Optimizing channel compensation throughstrategic supplier relationshipLeverage supplier performance
GM%
CTS
DSO
DOI
DPO
OPPORTUNITY
CAPABILITY
> HUMAN CAPITAL> INFORMATION CAPITAL> ORGANIZATION CAPITAL
> FINANCIAL CAPITAL
OPERATINGMARGIN
CASHCONVERSION
CYCLE
SUPPORTSERVICES
STORE
SELL
SELL
SOURCE
STOCK
SUPPLYCHAIN
PLANNING
SOURCE
SHIP
BUSINESSMODEL
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
ECONOMICDRIVERS
RESOURCEDRIVERS
>> Shareholders>> Leadership
>> Human Capital>> Information Capital>> Organization Capital
>> Supplier>> Purchasing Workforce
>> Supplier>> Customer>> Cross-functional Workforce
>> Supplier>> Sourcing Workforce
>> Customer>> Sales Force
>> Customer>> Operations Workforce
>> Customer>> Sales Force
SUSTAINING GROWTH - BEST PRACTICESHow do we sustain profitable growth against strategic risk?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Risk Factors Best PracticesWhat Went Wrong Root Causes
External market condition
Adjacency & acquisition failure
Lack of competitive value proposition
Disruptive competitor entry
Lack of customer rationalization
Restructuring
Competency gaps
Market segment overdependency
Execution breakdown
Supply chain disruption
Market conditions and opportunity
Opportunity potential and alignment
Market relevance of value proposition
Industry structure and opportunity
Customer potential and profitability
Acquisition integration capability
Competency & talent retention
End customer marketopportunity
Ability to deliver valueproposition effectively
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
SUSTAININGGROWTH
MOMENTUM
Assumptions about:
Growth Opporunity –Potential &Alignment
CustomerRetention
ValueProposition
Effectiveness
SupplierRetention
Economy
IndustryStructure
ASSUMPTIONSABOUT
OPPORTUNITY
InformationCapital
OrganizationalCapital
FinancialCapital
BusinessContinuity
ProcessCapital
ASSUMPTIONSABOUT
CAPABILITY
HumanCapital
>> Customized economic modeling & business cycle forecasting
>> Strategic planning (Competitive forces analysis)
>> Understand supplier channel strategies>> Align supplier & distributor strategies
>> Market intelligence>> Customer collaboration>> Alignment with core business model, opportunity & capability
>> Organization capital readiness (Leadership, Culture and Alignment)
>> Funding sources (Reliability & Accessibility)
>> Getting inside customer value map>> Retention metrics & drivers>> Loyalty recognition
>> Adapt value proposition for relevance and competitiveness
>> Strategic process performance
>> Disaster recovery readiness>> Supply chain risk management
>> Human capital readiness>> Human capital retention
>> Information capital readiness
>> Strategy & Capability Testing - Periodical validation of assumptions behind opportunity and capability through unbiased assessments
>> Decision Modeling and Scenario Planning
>> Retention Strategy - Customer, Supplier, Human Capital & Shareholders
DISTRIBUTION GROWTH FRAMEWORK
GROWTH
PROFITABLE GROWTH
SUSTAINABLE PROFITABLEGROWTH
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
COMPANY
VISI
N
&
MISSION
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Planning Growth Dimensions Financial DriversGrowth Processes Metrics
WHY SHOULDCUSTOMERS
DO BUSINESSWITH US?
5
HOW DO WEGET THERE?
4
WHERE DO WEWANT TO BE?
3
WHEREARE WE?
2
WHAT ISTHE MARKET?
1
CAPABILITY
RISK MANAGEMENT
GrowthStrategy
GrowthDrivers
GrowthMechanism
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
SUSTAINGROWTH
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
>> Gross Margin (GM%)>> Operating Margin (EBITDA%)>> Cash Conversion Cycle (DSO + DOI - DPO)
>> CAGR (Compound Annual Growth Rate)>> Impact on Competitive Advantage>> Risk Quotient
>> ROIC (Return On Invested Capital)
SHAREHOLDER
VALUE
CUSTOMER SERVICE
GROWTH
PROFITABILITYASSET
EFFICIENCY
CASH FLOW
OpportunityAssumptions
RetentionStrategy
CapabilityAssumptions
OPPORTUNITY
GENERATING GROWTH MANAGING GROWTH SUSTAINING GROWTH1 2
Key Attributes:
INNOVATION
FOCUS
STRATEGIC FIT
Key Attributes:
ALIGNMENT
COMMUNICATION
ACCOUNTABILITY
Key Attributes:
VALIDATION
CONSISTENCY
STABILITY
3
DeLiVeRABLeS
This program is designed to help distributors achieve competitiveness in the New Normal. The program combines global Supply Chain Lab’s past four research consortiums over the last decade. These research efforts exclusively focused on distributors across 25 lines of trade. The research efforts generated a diverse set of best practices that focus on key competencies. These competencies are distilled and packed into this three- day executive session. if you are planning to set your firm on a sustainable profitable growth journey while divsharpening competitive advantage in your marketplace, this program provides you a blueprint to achieve the same. if you are not planning to grow your firm above-average industry growth, this program content may not align with your strategic intent.
THe PRogRAM HAS THRee PARTS THAT FoCUS oN SUSTAiNABLe, PRoFiTABLe gRowTH:
Achieving Competitive Growth > How to generate growth while building competitive advantage?
Managing Competitive Growth > How to manage profitability while growing?
Sustaining Competitive Growth > How to sustain growth while sharpening competitive advantage?
All three sections start with motivation and analytics behind each best practice. each section will explore the best practices in detail with the help of visual aids (a detailed map/framework linking critical components of best practices to shareholder value and customer service). Team-based group exercises are conducted throughout the program to make learning more effective. At the end of each section, a self-assessment workbook will be provided to all participants. The attendees, using the workbook will assess their firm against best practices and identify two action items that will help them build growth-oriented capabilities. At this program, you will receive a comprehensive process assessment workbook, best practices booklet, and framework maps (6 maps).
PROGRAM OVERVIEW
“The information is organized very well, supported by robust research specifically on the distribution industry, presented in an easily digestible manner, and linked to real-world examples to help convert concepts into actionable items.”
David A. Larson, Vice President–Operations, DW Distribution Inc.
“We are impressed with the material and its potential impact on our profitability. Truly information and education for the times.”
Gary McKillican, President and CEO, McKillican International, Inc.
RegiSTeR Now!http://id.tamu.edu
AChievinG CoMPetitive Growth - How to generate growth while achieving competitive advantage?
Generating Growth Opportunities• Growth Framework• Growth Drivers and Strategies• Growth Mechanisms
SuStAininG CoMPetitive Growth - How to sustain growth while sharpening competitive advantage?
Sustaining and Growing Margins – Pricing Optimization• Primary Drivers – What are the key variables that should drive a pricing decision?• Analytics – How to analyze each variable?• Optimization – Developing and building pricing rules• Execution – Roadmap for success
MAnAGinG CoMPetitive Growth - How to manage profitability while growing?
Optimizing Distributor Profitability• Business Process Framework• Financial Framework• Optimizing Profitability – The Five-Step Methodology• Double EBITDA and Triple RONA
DISTRIBUTION GROWTH FRAMEWORK
GROWTH
PROFITABLE GROWTH
SUSTAINABLE PROFITABLEGROWTH
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
COMPANY
VISI
N
&
MISSION
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Planning Growth Dimensions Financial DriversGrowth Processes Metrics
WHY SHOULDCUSTOMERS
DO BUSINESSWITH US?
5
HOW DO WEGET THERE?
4
WHERE DO WEWANT TO BE?
3
WHEREARE WE?
2
WHAT ISTHE MARKET?
1
CAPABILITY
RISK MANAGEMENT
GrowthStrategy
GrowthDrivers
GrowthMechanism
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
SUSTAINGROWTH
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
>> Gross Margin (GM%)>> Operating Margin (EBITDA%)>> Cash Conversion Cycle (DSO + DOI - DPO)
>> CAGR (Compound Annual Growth Rate)>> Impact on Competitive Advantage>> Risk Quotient
>> ROIC (Return On Invested Capital)
SHAREHOLDER
VALUE
CUSTOMER SERVICE
GROWTH
PROFITABILITYASSET
EFFICIENCY
CASH FLOW
OpportunityAssumptions
RetentionStrategy
CapabilityAssumptions
OPPORTUNITY
GENERATING GROWTH MANAGING GROWTH SUSTAINING GROWTH1 2
Key Attributes:
INNOVATION
FOCUS
STRATEGIC FIT
Key Attributes:
ALIGNMENT
COMMUNICATION
ACCOUNTABILITY
Key Attributes:
VALIDATION
CONSISTENCY
STABILITY
3>> Executive and Senior Management>> High Potential Candidates for Management>> Strategic Managers>> Regional Profit Center Heads>> Business Development Managers
WhO ShOuld AttEnd?
Building Competitive Advantage• Sales and Marketing Strategy• Market Segmentation• Target Market Selection• Competitive Value Proposition
DAY 1
DAY 2
DAY 3
Sales and Marketing Processes• Customer Stratification• Sales Force Design, Development and Management• Marketing Communications
Sustaining Growth – How to sustain profitable growth against strategic risk?• Growth Barriers• Blind spots – Opportunity & Capability• Risk Management• Competitive Value Proposition
This program is designed to help distributors achieve competitiveness in the New Normal. The program combines global Supply Chain Lab’s past four research consortiums over the last decade. These research efforts exclusively focused on distributors across 25 lines of trade. The research efforts generated a diverse set of best practices that focus on key competencies. These competencies are distilled and packed into this three- day executive session. if you are planning to set your firm on a sustainable profitable growth journey while divsharpening competitive advantage in your marketplace, this program provides you a blueprint to achieve the same. if you are not planning to grow your firm above-average industry growth, this program content may not align with your strategic intent.
THe PRogRAM HAS THRee PARTS THAT FoCUS oN SUSTAiNABLe, PRoFiTABLe gRowTH:
Achieving Competitive Growth > How to generate growth while building competitive advantage?
Managing Competitive Growth > How to manage profitability while growing?
Sustaining Competitive Growth > How to sustain growth while sharpening competitive advantage?
All three sections start with motivation and analytics behind each best practice. each section will explore the best practices in detail with the help of visual aids (a detailed map/framework linking critical components of best practices to shareholder value and customer service). Team-based group exercises are conducted throughout the program to make learning more effective. At the end of each section, a self-assessment workbook will be provided to all participants. The attendees, using the workbook will assess their firm against best practices and identify two action items that will help them build growth-oriented capabilities. At this program, you will receive a comprehensive process assessment workbook, best practices booklet, and framework maps (6 maps).
PROGRAM OVERVIEW
“The information is organized very well, supported by robust research specifically on the distribution industry, presented in an easily digestible manner, and linked to real-world examples to help convert concepts into actionable items.”
David A. Larson, Vice President–Operations, DW Distribution Inc.
“We are impressed with the material and its potential impact on our profitability. Truly information and education for the times.”
Gary McKillican, President and CEO, McKillican International, Inc.
RegiSTeR Now!http://id.tamu.edu
AChievinG CoMPetitive Growth - How to generate growth while achieving competitive advantage?
Generating Growth Opportunities• Growth Framework• Growth Drivers and Strategies• Growth Mechanisms
SuStAininG CoMPetitive Growth - How to sustain growth while sharpening competitive advantage?
Sustaining and Growing Margins – Pricing Optimization• Primary Drivers – What are the key variables that should drive a pricing decision?• Analytics – How to analyze each variable?• Optimization – Developing and building pricing rules• Execution – Roadmap for success
MAnAGinG CoMPetitive Growth - How to manage profitability while growing?
Optimizing Distributor Profitability• Business Process Framework• Financial Framework• Optimizing Profitability – The Five-Step Methodology• Double EBITDA and Triple RONA
DISTRIBUTION GROWTH FRAMEWORK
GROWTH
PROFITABLE GROWTH
SUSTAINABLE PROFITABLEGROWTH
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
COMPANY
VISI
N
&
MISSION
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Planning Growth Dimensions Financial DriversGrowth Processes Metrics
WHY SHOULDCUSTOMERS
DO BUSINESSWITH US?
5
HOW DO WEGET THERE?
4
WHERE DO WEWANT TO BE?
3
WHEREARE WE?
2
WHAT ISTHE MARKET?
1
CAPABILITY
RISK MANAGEMENT
GrowthStrategy
GrowthDrivers
GrowthMechanism
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
SUSTAINGROWTH
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
>> Gross Margin (GM%)>> Operating Margin (EBITDA%)>> Cash Conversion Cycle (DSO + DOI - DPO)
>> CAGR (Compound Annual Growth Rate)>> Impact on Competitive Advantage>> Risk Quotient
>> ROIC (Return On Invested Capital)
SHAREHOLDER
VALUE
CUSTOMER SERVICE
GROWTH
PROFITABILITYASSET
EFFICIENCY
CASH FLOW
OpportunityAssumptions
RetentionStrategy
CapabilityAssumptions
OPPORTUNITY
GENERATING GROWTH MANAGING GROWTH SUSTAINING GROWTH1 2
Key Attributes:
INNOVATION
FOCUS
STRATEGIC FIT
Key Attributes:
ALIGNMENT
COMMUNICATION
ACCOUNTABILITY
Key Attributes:
VALIDATION
CONSISTENCY
STABILITY
3>> Executive and Senior Management>> High Potential Candidates for Management>> Strategic Managers>> Regional Profit Center Heads>> Business Development Managers
WhO ShOuld AttEnd?
Building Competitive Advantage• Sales and Marketing Strategy• Market Segmentation• Target Market Selection• Competitive Value Proposition
DAY 1
DAY 2
DAY 3
Sales and Marketing Processes• Customer Stratification• Sales Force Design, Development and Management• Marketing Communications
Sustaining Growth – How to sustain profitable growth against strategic risk?• Growth Barriers• Blind spots – Opportunity & Capability• Risk Management• Competitive Value Proposition
Fermier Hall, MS 3367Texas A&M University
College Station, TX 77840-3367Phone: 979-845-4984
Fax: 979-845-4980http://id.tamu.edu
Phone: 979-845-4984 / 866-
260-2463 Fax: 979-845-4980http://readcenter.tamu.edu
Executive Session on Distributor Competitive Advantage
Creating Competitive Advantage Through Education
“‘Customer Stratification’ has the power to enable us to trans-form our company from being product-driven to customer- driven. It has helped us understand our customers in greater detail, enabling us to optimize our selling resources, which will result in an improved ROI.”
Don Schalk, President and COO, C.H. Briggs Company
“Given the complexity of pricing, the Texas A&M Pricing Optimization program has gone a long way to specifying all the relevant elements and more importantly putting them in terms that can be quantified and managed. A&M can help you understand the variables and the math of distribution pricing. Don’t get on the phone without them”
Lawrence Mohr, Ph. D., Senior Vice President (retired), F.W. Webb Company
RegiSTeR Now!http://id.tamu.edu
Optimizing Distributor ProfitabilityBest Practices to a Stronger Bottom Line
F. Barry Lawrence • Senthil Gunasekaran • Pradip Krishnadevarajan
“Today’s competitive environment requires that management make better data-driven decisions. Sales and Marketing Optimization will map for you the process to make better, informed decisions. We can no longer afford to treat the sales process as an art; it requires a structured approach and this publication will provide you with the tools to accomplish that in your organization.”
Joseph Nettemeyer, President and CEO, Valin Corporation
Business Processes Process Metrics Finance Elements Financial Drivers
DISTRIBUTOR PROFITABILITY FRAMEWORKLinking Business Processes and Shareholder Value
STORE
SELL
SHIP
SUPPLYCHAIN
PLANNING
SUPPORTSERVICES
SOURCE
STOCK
Gross Margin
Days Payables Outstanding
Cash-to-Cash Cycle Time
Working Capital
Inventory Turnover
GMROII
Total Asset Turnover
Revenue Growth
Cash-to-Cash Cycle Time
Working Capital
Inventory Turnover
GMROII
Total Asset Turnover
Revenue Growth
Gross Margin
BUSINES
S
PROCESSES
SHAREHOLDER
VALUE
SHAREHOLDER VALUE
GROWTH PROFITABILITY ASSETEFFICIENCY
CASHFLOW
BUSINESSPROCESSES
FINANCIALDRIVERS
SOURCE STOCK STORE SELL SHIP
SUPPLY CHAIN PLANNING
SUPPORT SERVICES
Days Sales Outstanding
Gross Margin
Total Asset Turnover
Revenue Growth
EBITDA
Supplier Management(Strategic Sourcing)
Fleet Management
Dispatch Management
3PL / Carrier Management
Customer Order Fulfillment
Sales Management
Pricing Management
Marketing Management
Warehouse Fulfillment (Inbound)
Warehouse Management
Inventory Management
Supply Chain Optimization
Information Technology
Finance Management
Human Resource Management
Product ReceivingProduct Put-Away
Product PlacementLocation TypeLocation IdentificationProduct Storage
Cycle Counting
Sales Force StratificationMapping Customers and Sales ForceSales Compensation Techniques
Customer StratificationCost-to-Serve AssessmentNew Customer Identification
Pricing Optimization
Voice of Customer Market Selection and Target Strategy
Fleet Capacity ManagementFleet Cost Assessment
Routing OptimizationLoading Optimization
Carrier Selection and Performance
Product PickingOrder Delivery
New Facility Location
Network OptimizationResource and Asset Alignment(Supplier - Inventory - Customer)Service Level Optimization
System Integration
Credit Management
Change Management
Recruitment and RetentionAttrition
Total Landed Cost
Payment Terms
Quality and Flexibility
Lead Time and Variability
Fill Rate
Growth Potential
Data Integrity
Invoice Accuracy
Past Due Tracking Efficiency
Training Effectiveness (Benefit-to-Cost Ratio)
Time and Cost-to-Hire
Retention Rate
Accuracy and Efficiency
Space Utilization
Item and Location Accuracy
Sales Force Mix
Customer Mix
Cost-to-Serve and Right Price
Time-to-Market
Qualified Leads Per Marketing Activity
Asset Utilization
On-Time Delivery
Accuracy and Efficiency
Cost of Goods Sold
Accounts Payable
Inventory
Revenue
Inventory
Revenue
Cost of Goods Sold
Accounts Receivable
Revenue
Marketing Expenses (Payroll, Promotion, Media)
Fixed Assets (Plant, Property, Equipment)
Transportation Expenses
Warehouse Payroll
Revenue
GROWTH
PROFITABILITY
CASH FLOW
Total Asset Turnover
Working Capital
Inventory Turnover
EBITDA
Revenue Growth
Working Capital
Days Sales Outstanding
Accounts Receivable Turnover
EBITDA
Revenue Growth
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
Supplier SelectionSupplier PerformanceSupplier StratificationSupplier RelationshipRight Number of Suppliers
Inventory Stratification
What to Forecast?Demand ClassificationForecasting Method
When to Order? (Reorder Point)How Much to Order? (Order Quantity)Replenishment Policy
Inventory Mix
Forecast Accuracy
Fill Rate
Total Landed Cost
Revenue
Warehouse Payroll
Warehouse Rent
Inventory Write-Off
Total Asset Turnover
Revenue Growth
EBITDA
Total Asset Turnover
EBITDA
Revenue Growth
Fixed Assets (Plant, Property, Equipment)
Inventory
Operating Expenses (Transportation and Warehouse)
Revenue
Inventory
Accounts Receivable
Additional IT Expenses
Bad Debt (Write-Offs)
Hiring and Training Cost
Revenue
Optimal Network Location
Optimal Resource Deployment
Optimal Service Level
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© 2008 Supply Chain Systems Laboratory, Texas A&M University
GENERATING GROWTH - BEST PRACTICESHow do we generate growth opportunities?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.eduwww.nawpubs.org
MetricsGrowth Strategy Best Practices
LEVERAGEAccount Penetration - Existing customers
GrowthMechanism
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
PENETRATEMarket penetration - New Customers
BROADENNew Products and Services
ADDSales & Marketing Channels
REACH OUTGeography
EXPANDMarket Segments
BUILDNew Platform (multiple drivers)
INNOVATEValue Proposition Innovation
DIVERSIFYLine of Trade & Value Chain Function
GROWTHDRIVERS
IndustryDynamics
CustomerRelationships
SupplierRelationships
Sales &MarketingStrategy
Sales ForceEffectiveness
Account gap analysisCustomer stratificationSales force effectivenessRetention strategyValue proposition update
Market gap analysisSupplier collaborationCompetitive value propositionSales force performance managementSelling process
Growth mapping core customer andstrategic supplierIndustry trends analysisCompetitive analysis
Customer feedbackPain point analysisGrowth mapping core customer and strategic supplierProduct & service portfolio management
Market mappingTechnology developmentsCustomer need/convenience
Market mappingIndustry trends analysisCompetitive analysis
Growth mapping core customer andstrategic supplierMapping key competitorsSupply chain network optimization
Market segmentationSupplier growth inputsCompetitive analysisIndustry trends analysis
Customer feedbackSupplier inputsValue chain analysisCross-industry best practices
Core customer retention rateCore customer conversion rateShare of walletBalance revenue reliance (risk)
New customer acquisition rateRevenue from new (core) customersNew customer retention rate
Growth pipeline run rateGrowth from new platformsChange in competitive advantage
Growth from new products and services Value proposition leverageBalance over-dependency
Growth from new channelsChange in competitive advantage
Change in competitive advantageRisk managementGrowth from diversification
Growth from new territories Value proposition leverage(national accounts)
Growth from new market segmentsDegree of variety in end markets(risk factors)
Number of innovative effortsGrowth from innovate opportunitiesChange in competitive advantage
OrganicDevelopment
Acquisition
Merger
Strategic Alliance
Growth Drivers
© 2011 Global Supply Chain Laboratory
MANAGING GROWTH - BEST PRACTICESHow do we manage profitability while growing?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Profitability Drivers ProcessGroups Growth ForcesGrowth Challenges Best Practices
Supplier proliferationProduct mix Supplier's channel strategyChannel power balanceChannel visibility
Competency GapTalent attractivenessTechnology and applications infrastructureLeadership gapLack of coordination, control & synergiesOrganizational mobility
Margin pressure from growing customersLack of pricing strategy (value proposition)Competency gapLack of support toolsSub-optimal market mix
SKU proliferationProduct portfolio / mixCost Vs service trade-offFill rate challengesSupplier performance
Sales force capacity vs customer coverageLack of sales-support productivity toolsMisaligned sales force incentives
Warehouse capacityOperating cost challengesCustomer service (accuracy & efficiency)
Ownership typeAccess to growth fundingInvestor attractiveness
Transportation capacityTransportation cost (routing & cubing / loading)Customer service (on-time delivery)
Credit requests from growing customers“New Normal” challenges
Credit, return and rebate policies forproduct expansion growth strategies
Supplier stratification & relationship strategyOptimizing channel compensationChannel growth strategy alignmentLeverage supplier performance
Customer stratificationPricing optimizationIn-built mechanism for early warningsActive adaptation of value propositionMarket segmentation
Inventory stratificationFocused forecastingDynamic replenishmentInventory network optimizationCompetency development
Sales force size & structureSales force productivity (support tools)Sales force compensationAligning customer, company and sales force
Operations (inbound & outbound) productivity - LeanEconomy of scaleBest practices sharingInternal benchmarking
Human capital developmentInformation capital readinessStrategic awareness and alignmentCustomer-centricGrowth mindset Creative leadershipStrategy & structure match
Financial fitness through free cash flow andoperating productivityInvestor confidence
Routing and loading optimizationEconomy of scaleSupply chain network optimization (Transportation vs Inventory)
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
Customized terms based on customer stratificationIn-built mechanism for early warningsActive adaptation of value proposition
Optimizing channel compensation throughstrategic supplier relationshipLeverage supplier performance
GM%
CTS
DSO
DOI
DPO
OPPORTUNITY
CAPABILITY
> HUMAN CAPITAL> INFORMATION CAPITAL> ORGANIZATION CAPITAL
> FINANCIAL CAPITAL
OPERATINGMARGIN
CASHCONVERSION
CYCLE
SUPPORTSERVICES
STORE
SELL
SELL
SOURCE
STOCK
SUPPLYCHAIN
PLANNING
SOURCE
SHIP
BUSINESSMODEL
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
ECONOMICDRIVERS
RESOURCEDRIVERS
>> Shareholders>> Leadership
>> Human Capital>> Information Capital>> Organization Capital
>> Supplier>> Purchasing Workforce
>> Supplier>> Customer>> Cross-functional Workforce
>> Supplier>> Sourcing Workforce
>> Customer>> Sales Force
>> Customer>> Operations Workforce
>> Customer>> Sales Force
SUSTAINING GROWTH - BEST PRACTICESHow do we sustain profitable growth against strategic risk?
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Risk Factors Best PracticesWhat Went Wrong Root Causes
External market condition
Adjacency & acquisition failure
Lack of competitive value proposition
Disruptive competitor entry
Lack of customer rationalization
Restructuring
Competency gaps
Market segment overdependency
Execution breakdown
Supply chain disruption
Market conditions and opportunity
Opportunity potential and alignment
Market relevance of value proposition
Industry structure and opportunity
Customer potential and profitability
Acquisition integration capability
Competency & talent retention
End customer marketopportunity
Ability to deliver valueproposition effectively
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
SUSTAININGGROWTH
MOMENTUM
Assumptions about:
Growth Opporunity –Potential &Alignment
CustomerRetention
ValueProposition
Effectiveness
SupplierRetention
Economy
IndustryStructure
ASSUMPTIONSABOUT
OPPORTUNITY
InformationCapital
OrganizationalCapital
FinancialCapital
BusinessContinuity
ProcessCapital
ASSUMPTIONSABOUT
CAPABILITY
HumanCapital
>> Customized economic modeling & business cycle forecasting
>> Strategic planning (Competitive forces analysis)
>> Understand supplier channel strategies>> Align supplier & distributor strategies
>> Market intelligence>> Customer collaboration>> Alignment with core business model, opportunity & capability
>> Organization capital readiness (Leadership, Culture and Alignment)
>> Funding sources (Reliability & Accessibility)
>> Getting inside customer value map>> Retention metrics & drivers>> Loyalty recognition
>> Adapt value proposition for relevance and competitiveness
>> Strategic process performance
>> Disaster recovery readiness>> Supply chain risk management
>> Human capital readiness>> Human capital retention
>> Information capital readiness
>> Strategy & Capability Testing - Periodical validation of assumptions behind opportunity and capability through unbiased assessments
>> Decision Modeling and Scenario Planning
>> Retention Strategy - Customer, Supplier, Human Capital & Shareholders
DISTRIBUTION GROWTH FRAMEWORK
GROWTH
PROFITABLE GROWTH
SUSTAINABLE PROFITABLEGROWTH
COUNCIL F R RESEARCHON DISTRIBUTOR BEST PRACTICESAn Alliance of the NAW Institute & Texas A&M University
CRDBP
COMPANY
VISI
N
&
MISSION
www.naw.org/crdbp http://supplychain.tamu.edu
© 2011 Global Supply Chain Laboratory
www.nawpubs.org
Strategic Planning Growth Dimensions Financial DriversGrowth Processes Metrics
WHY SHOULDCUSTOMERS
DO BUSINESSWITH US?
5
HOW DO WEGET THERE?
4
WHERE DO WEWANT TO BE?
3
WHEREARE WE?
2
WHAT ISTHE MARKET?
1
CAPABILITY
RISK MANAGEMENT
GrowthStrategy
GrowthDrivers
GrowthMechanism
Customers Human andIT Capital
Suppliers Shareholders
GROWTHFORCES
SUSTAINGROWTH
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
GROWTH
PROFITABILITY
CASH FLOW
ASSETEFFICIENCY
>> Gross Margin (GM%)>> Operating Margin (EBITDA%)>> Cash Conversion Cycle (DSO + DOI - DPO)
>> CAGR (Compound Annual Growth Rate)>> Impact on Competitive Advantage>> Risk Quotient
>> ROIC (Return On Invested Capital)
SHAREHOLDER
VALUE
CUSTOMER SERVICE
GROWTH
PROFITABILITYASSET
EFFICIENCY
CASH FLOW
OpportunityAssumptions
RetentionStrategy
CapabilityAssumptions
OPPORTUNITY
GENERATING GROWTH MANAGING GROWTH SUSTAINING GROWTH1 2
Key Attributes:
INNOVATION
FOCUS
STRATEGIC FIT
Key Attributes:
ALIGNMENT
COMMUNICATION
ACCOUNTABILITY
Key Attributes:
VALIDATION
CONSISTENCY
STABILITY
3
DeLiVeRABLeS
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