With a few key analytical tools, you could be taking advantage of the data explosion.
We're in the midst of a data explosion. Worldwide, it's predicted that the quantity of data being collected doubles every 18 months. Distributors deal with this every day. Distributor data may come from multiple sources including industry data warehouses and service providers, the Internet or the distributors' own enterprise resource planning (ERP) databases. Internet web analytics are one example of how anything that is viewed, clicked or typed can be tabulated, analyzed and reported. Communication providers for cell and smart phones routinely collect similar usage statistics on the number of calls, length of calls, and types of usage such as texting, emails, web usage and even tweeting.
Technology is growing our capabilities to measure how customers use services for research and purchase. Companies at all points in the electrical supply chain need fast access to data to drive their business systems and use data analysis to improve products, services and performance objectives. In the midst of all of this technology and opportunity, distributors must find new ways to increase visibility and value to retain or attract new customers. Data analysis is the key.
The problem is that we're in the midst of recession and companies must find creative ways to grow and thrive without adding expenses. Living by the old adage, “pick yourself up by your boot strings,” companies are creating new solutions using the same components, but with small additions to produce different, more valuable results. This is possible with data plus talented knowledge workers which, fortunately, are two resources most distributors possess.
Analyze Customer Buying Habits
Most distributors' ERP or CRM (customer relationship management) software includes role-based permissions, activity tracking audit trails and event-driven timestamps. Drilling into the data using analysis tools on traditional filter points (sales by customer, by product group, by sales rep, etc.) but with the added dynamics of time, session and frequency can provide you a new view of customer buying habits. Just as web analytics provide companies with insights and statistics about what attracts prospects and buyers to use and make purchases on a web site, the time and duration dynamics can provide distributors with important process visibility about their customers, employees and procedures.
Although many ERP or CRM software programs have the data attributes you need to produce reports showing buyer-habits and process-duration reports, not all users take advantage of this kind of reporting. To be fair, it is time-consuming to collect, analyze and report on data with multiple filter points. With today's reduced staffing and no proven ROI for this activity, it might be relegated as a nice to have, back-burner project. That is a mistake. This data is too valuable to ignore because when compared against a distributor's key performance indicators, a different story about the business may unfold.
Identify Poor Performers
To check this out, start with one or two customers. Select a poor-performing customer, where your operating costs on the account are higher than the profit you make from it. Any improvement will benefit your company by either lowering operating costs or increasing sales, so there is justification for the time investment. Choose customers who make timely payments or, if slow payments have occurred given the poor economy, they quickly correct those or at least provide dependable communications on when payments will be made. Another type of customer to include in this test is a large company where, for some reason, you're getting too small a portion of the business for the account to be profitable. This customer should be also being making on-time payments so this factor can be eliminated from the analysis.
Since this is a limited study, determine in advance what key factors you want to study and select a limited time period to study. For buying-habits data, key factors might include:
time/frequency/type of purchases by each company;
time/frequency/type of purchases by individual by company;
time/frequency /error rate (including types of errors, causes and solutions);
time/frequency/method of order (phone, Web, fax, EDI).
Determine the key factor to be used and begin the analysis. “Order errors” as a key factor is a good starting point because of the likelihood there is stored historical documents of past conditions and resolutions. This is especially true for companies maintaining their ISO 9000 certification, which requires documented processes for error reporting and solutions. Using data analysis on error rates, review for the number of errors, types of errors, causes, resolution and process adjustments, and then by customer-employee, by manufacturer and by employee.
Analysis of data regarding an individual's buying-habits may be the most revealing for problem customers. It's possible that what you've thought were problem customers are really problem employees of customers. With the turnover rate in the supply chain, it's better to interpret error incidences as opportunities to provide new product and process training to customers' employees. (Here's a bit of “boot straps thinking”: Offer a course on the most efficient ways to place different types of orders. Your own employees are the experts.) Some ERP or CRM software programs may also include a score-carding function for customers or suppliers. This is another way to document and benchmark customer behavior going forward.
Once this analysis is completed, the documented results can be separated into two groups: internal distributor process improvements and customer improvements. Internal improvements will be referred to your quality administration or appropriate functional group for operational changes. Problems that must be addressed on the customer end are opportunities for training. Use the analysis to show the customers these opportunities, and if they take steps to improve, the cost of doing business together will be reduced, resulting in better profit margins on quoted jobs.
Create Customer Data Profiles
Another way to use data to enhance visibility and value to your customers is to share their job and purchase order activity data with them. Prepare a data profile of customer activity covering bids, open jobs or all activity in the previous quarter or the period of your choice. Ask sales, accounts receivable and other experts to review the data for missed opportunities for discounts, waived freight charges or lower prices. With this information, you can prepare recommendations on improving services and efficiencies.
These improvements will come in the following areas:
Changes that would result in customer savings (consolidating orders, reduced freight charges)
Improved bid work
Free product training on distributor's premises
Collaboration on green opportunities
Making customers aware of any special services you offer, new or old
For large items like conduit and wire, reminding the customer of your services and information resources
Customer should subscribe to your newsletters, magazines, RSS feeds from your web site and so forth to stay up on new opportunities
The data profile should also include customers' employee activity, as this may be helpful for the customer in managing their own employees. If there are problems with customer employees needing more training, it will be easy to highlight these as ways to improve the process.
Meeting with customers to discuss ways to improve profitability for both companies and asking for their help in achieving these goals will have significant positive results in strengthening relationships and improving sales and profitability. Your customers are dealing with the same tough economic problems as you are. Order problems retard actual profit as employees from both the distributor and the contractor engage to solve them. Most distributor customers will appreciate the opportunity to proactively correct mutual problems that grow margins for both companies.
It's important to learn from customers what matters most and what is your value to them. That feedback will help retain or regain a competitive advantage in the marketplace and help your company to develop measures that are of value to your customers.
Analyze Process Efficiencies Using Company KPIs
Most ERP, CRM systems are designed for beginning-to-end continuous work flow. This provides the process turnarounds which can be checked against your company's key performance indicators (KPIs) for each performance objective, giving you the insight to improve your internal processes. Frequent data reporting provides management with the current view on several processes, including days sales outstanding, service level agreements, quote-to-cash cycles, items for return status, damaged goods, accuracy in inventory picks and periodic monetization of inventory value and inventory movement, among others. It is very important that this type of operational reporting is available so that processes can be checked against the allowable KPI tolerances and adjustments can be made when performance improves and allowances need to be recalibrated.
Key performance indicators should be created and continually reviewed by a team made up of those responsible for the performance objective, along with the management team. Successful processes require input and buy-in from the team performing the work.
Technology is changing the supply chain again. It's no longer just about what products are sold, the new value to the business is capturing data on the processes used to create or sustain products and services. The old days of just accepting customer problems and thinking this was the distributors' competitive edge are gone. That customer is or will soon be out of business. When data stores expand and staffing is reduced, there will be increased data exposure to customers. Use this to your advantage by expanding process management beyond the walls of the supply house, share as much event-driven data as possible with customers, which will help your company and your customers grow together.