One Mean Competitive Advantage

Do you know how “X” makes and loses money? (Insert customers, brokers, or your own business activities).

This is not an area to guess, assume or remain in the dark. Insights into how your organization–as well as those involved in bringing your products to market–make and lose money are tied to better financial outcomes, more effective partnerships and yes, a mean and highly effective competitive advantage.

A few examples (among many):

Product development: Suppliers budget their NPD costs as a % of sales. But the longer the internal development and commercialization process, the more costs mount up–marketing must be proportionately steeper and the rate of sales proportionately higher and speedier for payback. When incremental sales shrink with each new roll out, the product is blamed–not the system or effectiveness of execution (which usually never varies). How and where money was made or lost in product development and execution remains a mystery–as do ways to uncover improvements and deliver better results.

Retailers: Suppliers don’t realize that their products and strategies are often at odds with retail’s operational functions and priorities–where money is really made and lost. Progressive retailers rank suppliers on a cost scale with terms as simple as “Top supplier”, “Valued; minor issues”, “Average; correct issues in 90 days”, “Below average; correct immediately or discontinue”, “Not approved.” Ask customers how your organization performs on their compliance criteria to uncover ways to help reduce their costs in the flow of business.

Distributors: Faulty assumptions about how broadliners make and lose money can mislead an entire supplier organization. No, distributors are not lining their pockets with earned income. Carrying costs can run 25% or higher for every $1M in unsold inventory. (Category management is an imperative). If your company is not generating sufficient operator demand and pull through to increase inventory turns, distributors are losing money stocking your line.

Brokers: Remarks that brokers pay more attention to their top 5 suppliers are misleading. It’s true that big lines require more resources but If not understanding how brokers make and lose money, you are missing an opportunity to increase your line’s value to your selling partners. As one simple exercise? Do the math: How many cases of product must be sold to an operator for your broker to break even with commission? Where are your brokers’ costs concentrated? Target activities that are mutually profitable, put the brakes on everything else. Watch collaboration and results improve.

Making it your organization’s business to know how money is made and lost in bringing products to market is not only smart, it makes for one mean competitive advantage.