HOW does your company take control of its profitability?
That's the focal point of Albert Bates' presentation, “The Profit Drivers: Suppliers, Customers and Internal Actions,” on Sunday, March 2, from 1:30-2:45 pm.
Bates, president of the Profit Planning Group in Boulder, Colorado, says it's not difficult to take control, but the typical NTEA member company is a small operator that might not know how.
“Most of them are still marketing and sales people — and not financial people,” he says. “I think they can do it, but they need someone to point out, ‘Here's the direction you need to go.’ The typical NTEA member is a $5-million-a-year operation (in sales). At that point, you don't really have a chief financial officer. You may have somebody you call a chief financial officer, but you really have a bookkeeper.
“If you have financial problems, there's nobody with the power to tell you, ‘Here are the problems we face, and here's what we ought to do about it.’ If my owner has a marketing background, he's not comfortable with those issues either. If we had a sales problem, the owner could address it in a hurry. But this isn't really in his area of expertise.”
Bates will examine why some companies make money and others don't. He'll ask, “Is profit really driven by what we're doing internally, or is it driven by what customers or suppliers are doing that create some problems for us?” To do that, he will look at the relationship between a company and its customers and its suppliers, and also turn the mirror on the company itself.
“What really causes profits to be what they are?” he says. “Do you have some customers you serve that are unprofitable and should be fired? Or should you try to change the way you work with them?
“It's awfully difficult to sit down and do an analysis, for example, of which customers you're making money off of and which you're not. There is a knowledge gap and maybe even an awareness gap that you ought to be doing that. We think there's a legitimate need to create the awareness that, ‘Gee, I ought to be thinking about this harder than I now am.’ ”
Bates will examine recent trends in profitability and compare the commercial truck and transportation equipment industry profit levels versus other distribution industries and how supplier actions impact profitability within distribution.
He'll use data from profit results of the typical NTEA member. For customers and suppliers, he'll use data from other industries that have done more detailed work in that area.
“What's the likelihood that you have some customers you're not making money off of?” he says. “And if you are losing money, how much is it costing you every year? That's going to have to be mostly external data, because we haven't done anything with the NTEA.”
He says profit improvement has to come from internal operations.
“You may have customers you don't really like, and you may have suppliers you don't really like,” he says. “But sooner or later, you have to get motivated and do something about it yourself. It also means that there are a lot of inefficiencies we think internally. Certainly there are pressures from customers for all those extra services they want and are not anxious to pay too high a price for. But you also have to say, ‘It's my business. It's my responsibility.’”
Following the presentation, sponsored by the NTEA Young Executives Network, there will be a panel discussion featuring Bates as well as distributors and suppliers who will share their perspectives on how manufacturer/distributor relations affect profitability.