Friday, November 16, 2018

Old Supply Chain Dogs Find New Tactics

Image result for old dog new tricks quoteSupply chain professionals likely don't recognize the names BlueKai or Silverpop. These companies built their technology to assist online marketing and advertising services.

Earlier last year, Oracle acquired BlueKai, which manages data for online marketing services. Similarly in early April, IBM said it would acquire Silverpop, which offers a suite of cloud-based marketing services. These companies were built from the ground up to manage online data and services. Both have technology to create a major advantage for the electronics manufacturing supply chain.

Jay Henderson, global strategy director of IBM Smarter Commerce division, said Big Blue continues to acquire online marketing technology that can "feed back up into the supply chain" to help manufacturing supply chain professionals with demand sensing and planning, along with shortening the replenishment cycle times between production and sales.

Image result for ibm smarter commerce

Using snippets of the marketing technology can help to compress procurement schedules, streamline manufacturing processes, and improve logistics and distribution from manufacturing to retail stores -- all through analytics, optimization, and consumer insights gained from online marketing. Here are some options to consider.

Learn quickly from mistakes. The Internet affords supply chain experts the ability to make mistakes and quickly recover if things don't go as planned. Build safeguards into processes. It hardly needs explaining how failure can cause damage. Online marketers have build in safeguards that allow them to see online campaign inefficiencies and make changes in real-time on the fly, especially for bid adjustments in advertising campaigns. Many online ads are bought and sold in real-time like bids in an auction or the stock exchange. Automation makes it happen in milliseconds.

Keep the focus on doing better. Ask yourself to define the underlying reason for doing things a particular way. Borrow ideas from other industries. It may take integrating technology or a change in business processes. Not all ideas will work. Radical changes may require test and measurement before full implementation, similar to the way the company might test new circuit boards or power supplies.

Think like a marketer. Imagine a positive outcome and re-engineering methods. Beware of the next big thing, but also observe and apply new thought processes. Electronics manufacturing supply chain execs can gain valuable insights from the way radical online technology works, while keeping traditional structures in place. Supply chain leaders need to design processes around Internet connectivity and technology that didn't exist when establishing their company's supply chain. One good example points to mobile devices and the concept based on the Internet of Things.

Gartner forecasts the Internet to become the hub for more than 26 billion devices by 2020, up from 0.9 billion in 2010. Depending on the type of industry, it will impact the information available to supply chain leaders and how their supply chain operates.

Respect the data. Bringing marketing technology into the manufacturing supply chain creates more data headaches, but it also helps companies better understand their potential and existing customers. The need for accurate data remains obvious, but many retailers and consumer products manufacturing companies might think back to the repercussions of data overload during the early days of bringing radio frequency identification technology into the supply chain to track materials in real-time.

Supply chain professionals had to find ways to sort through an abundance of data and determine what to use and what to discard. With online marketing technology moving into the manufacturing supply chain, the industry could relive similar struggles around managing data.

Act for long-term success. The most challenging part points to growing capabilities through new technology while maintaining structure. A tweak here or there can potentially lessen any impact from bringing online marketing technologies into the electronics manufacturing supply chain. The results from the technology could have profound impact on the business. It could raise accountability and give clarity into forecasting demand, create a mobile workforce, provide real-time feedback to supply chain managers trying to mitigate risk, raise margins and profit, and reclaim lost hours in unproductive meetings.

Are you ready to partner with a software that has the tools for your success?

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556.
 Or send a message to

Click here and tell us how we can help you with your business solutions.

Friday, November 9, 2018

Going Green - Is it really worth it?

Image result for go greenAccording to a Gartner Study Firms will focus more on sustainability for 2019
But is it just 'lip service'?

Sustainability will move up the business agenda as the economy grows according to a Gartner Study.

However, members of the Jury were divided on firm's motives for embracing the strategy, with some saying it was due to better cash flow and others saying sustainability had a contribution to make the bottom line in and of itself.

According to analyst James Bruwer, “Unfortunately we continuously see that – with the exception of some big firms – the issue of sustainability gets diluted during hard economic times and is recovered when the economy returns to growth.”

The study concludes that a general perception persists out in the wider world that sustainability is still a green fad and a bolt-on, rather than a fundamental part of an organization’s operations.

The reality it seems is that Sustainability via legislation is the only way to always deliver change, however, apart from in specific areas and specific industries there will always be other priorities that will drive the focus on "Going Green".

So do the numbers make sense? Show me the money...

Image result for go green cashThere are multiple ways in which your business can stand to gain from going green. From tax rebates to pricing incentives from various public bodies and environmental organizations to increased interest from consumers, a green reputation for your business can be worth millions of that other green we all love: cash.
Government Incentives. The EPA has strict laws protecting our environment from businesses and their resulting hazardous by-products. It is not enough to follow the bare minimum EPA regulations like dealing with toxic substances like lead paint or mold. The government offers incentives at a state and federal level to businesses in the form of tax breaks and credits. Maximize these incentives by checking out the Database of State Incentives for Renewables and Efficiency to find out what government incentives your business is eligible for in your state.

But let's ask ourselves , maybe it doesn't really matter as it "feels good" and sales is often about making our customers feel good. 

Customer Perceptions. A Nielsen study of consumer attitudes across 60 countries found that 55% of consumers worldwide would pay a premium for products offered by eco-friendly and socially responsible companies. These consumer claims are also backed up by research of actual sales figures.
Contributing to maintaining and upkeep of your immediate surroundings builds a positive image about your company in the local community. According to the Network for Business Stability, sales grow by $6 for every dollar donated by a company towards green initiatives.
The Green Procurement Compilation created by the General Services Administration in the United States offers detailed requirements from an ecological perspective for various products and services. Check out what the requirements are for your product category and get set to supply for large government contracts.

Image result for reduce reuse recycle Reduce your consumption of natural resources

The simplest and quickest way to becoming less of a burden on the planet is by reducing the amount of resources you and your business consume. Not only will this reduction be light on your pocket, it will also go a long way in conserving non-renewable resources like oil and natural gas. Some areas that businesses can reduce include:
  • Reduce paper usage by opting for double sided printing. 
  • Better yet move all customer invoicing to Electronic via Email or EDI 
  • Reduce waste by incorporating our MDS Vendor Portal to allow vendor to submit your invoices online (streamline your A/P Process as well) 
  • Another way of reducing your paper consumption is by going electronic using MDS Document Management. Take your record keeping, internal communications, and customer communications to the cloud and save huge money on printing, paper and filing expenses.
  • Reduce the use of electricity by moving to the cloud, cloud servers and data centers are generally more efficient and will save you money on eletrical , storage costs and possibly Internet costs.
  • Business travel, whether local or international, has a huge impact on consumption of fossil fuels. Reduce these consumption levels by opting instead for Internet Based Training and Meetings using video conferencing with clients, partners or co-workers based in different locations. Skype, Google Hangouts, even FaceTime are free alternatives to expensive business trips.
  • Reduce the amount of packaging your product uses. Alternately switch to eco-friendly packaging to lower your environmental footprint.

Are you ready to Go Green using Technology?

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556.
 Or send a message to

Click here and tell us how we can help you with your business solutions.

Friday, November 2, 2018

Will Millennials Break The Distributor Cord?

Image result for breaking the cordIn parts of North America, millennials and Generation Xers are parting ways with the television cable box. They are taking advantage of other ways — often at little or no charge — to watch television and movies and find other forms of entertainment.

It’s referred to as “breaking the cord,” and it’s a concern for many distributors marketing a wide range of products. These distributors are starting to wonder if some younger people, now in management positions, will soon be breaking the cord with distributors who have historically marketed products directly to facility managers and administrators.

Here’s the issue in a nutshell.
Image result for millennialsMillennials and Generation Xers are the first generations that have essentially transferred from shopping for products at brick-and-mortar stores to shopping through online retailers. They prefer purchasing this way. But because their numbers are growing so fast, they are highly educated and they are quickly entering and rising in management positions, distributors want to find new ways to still attract their business.

Size and Scope
Let’s examine some of the stats regarding these younger generations in North America:

  • Generation X typically refers to people born between 1966 and 1979.
  • Millennials were born from 1980 through 1994.
  • Generation X numbers approximately 40 million people
  • Millennials number about 70 million.

In the United States, about 60 percent of the people in these groups are college educated.
In less than 10 years, it is estimated that three out of four workers in a variety of industries will be millennials.

However, the stat most concerning to distributors is the following:

A study conducted by eMarketer finds that 40 percent of millennial males and more than 33 percent of millennial females “would buy everything online if they could.” And because this study was conducted three years ago, it’s likely that those percentages are even higher today.

Enter the Consultant

Astute distributors are aware of these facts and figures. However, distributors tend to be “survivors”; their industry has had many ups and downs.

So how are distributors surviving in a world where many of the people they will be working with prefer to buy everything online and without their help?

Simply, they are becoming consultants, something no online marketplace can become. Instead of simply marketing products to customers, they are offering “consultative selling,” to help the customer get exactly the product that will work best for their company.

Consultative selling refers to a method of selling in which distributors spend more time with customers in order to better understand their priorities, needs, and challenges. Armed with this knowledge, they attempt to recommend solutions that will address these issues. It’s different from a traditional sales approach in that it involves suggesting solutions to a problem rather than just focusing on selling a specific product.

“Showing up and throwing up” (instead of asking questions)

It is interesting to note that the consultative selling approach evolved in the 1950's as a new generation of people entered the workplace after World War II. They tended to be less interested in “product pushers” and more interested in working with consultants. By the 1970's, this form of selling had pretty much disappeared. A rebirth occurred about fifteen years ago, depending on the industry.

How does consultative selling work?

Assume a Nursing Home manager wants to reduce purchasing costs for woundcare products but has no idea where to start. Going online quickly becomes a trial-and-error process. She or he may select a new product for the facility— for instance, a new type of bandage —because it is less expensive, only to encounter results such as these:

The new woundcare product does not work as effectively as the one being replaced.
While the sticker price of the product is less, due to the poor absorbency it's ineffective.
And it ends up actually costing more in the long run.

The distributor, now a consultative salesperson, can prevent this from happening, so the client can make educated decisions, ending the trial-and-error/cross-your-fingers approach. This process involves a lot of communication between the facility manager and distributor — asking the right questions and discussing the many needs of the facility — before a buying decision can be reached.

To find solutions, often the distributor and customer turn to new technologies. While there are different systems available, some distributors now have access to cloud-based “dashboard” systems that can help the distributor and the client — working together — compare products based not only on price but on which products might work best in their facility.

Utilizing the latest technology like our updated WebCRM Dashboard, Salesman are now armed with comparative sales analysis and detailed product information in real time.

There are also web based software systems –— often referred to as “Customer Information Systems” — available in which facility managers can do a lot of their own research, something millennials and Generation Xers like. Essentially, these systems help managers “peel off the roof” of their facilities, to get a good look inside, to better understand their needs and view procurement solutions.

While millennials and Gen Xers may feel perfectly comfortable purchasing shirts and shorts online, when it comes to the hundreds of different products available for a Nursing facility, as an example, making the wrong purchasing decisions can negatively affect many patients, the appearance and health of the facility and could actually end up increasing costs and ultimately hurting your company. By using better technology and helping this new class of purchasing agents understand your value, you can help both your business and patient outcomes at the same time. 

Are you ready to partner with a software solution team that knows healthcare?

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556.
 Or send a message to

Click here and tell us how we can help you with your business solutions.

Friday, August 31, 2018

Big Data and how you can reap the benefits.

Big data is having an impact on organizations’ reaction time to supply chain issues. 
  •  (36%), increased supply chain efficiency of 10% or greater 
  •  (46%), Improved customer service operations.
big da·ta
  1. extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.

    "much IT investment is going towards managing and maintaining big data"

 The Big Data Analytics in Supply Chain: Hype or Here to Stay? Accenture Global Operations Megatrends Study found that companies are achieving significant results using big data analytics to improve supply chain performance and gain greater contextual intelligence.
figure 6 big data

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Friday, August 24, 2018

That one weird sales rep...

Image result for salesman cost memeFor those who have run sales organizations and are familiar with trying to tackle the sales commission model, there are no easy answers. It typically starts with something simple like paying off sales dollars and then typically as you grow, it balloons into a mess with multiple calculations, special deals and constant exceptions to the rule. 

I have always been a big proponent of paying commissions based upon profit , but that has it's pitfalls as well. So today we look at another way... 

Commissions and Activity Based Costing (ABC) 

The value a good Activity Based Costing (ABC) model can bring to a distributor cannot be underrated. A well-designed model can provide powerful insight on profitability drivers and provide useful inputs when making strategic decisions on sales resource allocations and pricing. However, tying sales incentives to the “profit” these models derive can be troublesome. In fact, tying sales incentives to net profit based on an ABC model can have unintended consequences for distributors.

All of us are familiar with net profit when it comes to a standard income statement. It’s the bottom line. It’s what’s left of the money the company takes in (revenue) after it pays its suppliers and its other expenses. Net profit as it relates to sales compensation is somewhat different. It relies on ABC-driven allocations to calculate a net profit at a transaction, customer, or, in this case, a sales territory level. Using the MDS-Nx System offers you and option to allocate that cost at an product , product class or company level. So as a percentage of the items cost you can add a "Load" to allow you to capture and review these costs. The salesman's view of Net profit would then be different from your view of true profit. 

So the question now becomes how do we arrive at that loaded amount? And what is the most fair way to allocate. 

The problem on the surface is that net profit treats every expense as if it were variable. Each order has multiple costs applied to it. Some of these costs are direct – such as the cost of an inside salesperson receiving and entering the order, or the cost of fuel, and driver labor for making a delivery. However, most of the costs that are allocated to each transaction are not direct, but indirect costs. Some of these allocations are relatively straightforward such as using deliveries to allocate delivery expense or warehouse orders to allocate warehouse expense. However, for staff functions such as IT, HR, finance and so on, allocations are often simply made as a percentage of sales.

If HR expense equates to 1 percent of a company’s sales, then everything sold receives a charge equal to 1 percent of its sale price for HR expense. And here is where the problem begins.

Many costs incurred by distribution businesses are not variable. Selling one additional widget no more increases HR cost than selling one less widget decreases it. Of course, “all costs are variable in the long run.” But many costs are not incurred in increments of $1 or $10 but instead in increments of $40,000 or $80,000 because they correspond to salaried employees. It is not unusual for between two-thirds and three-fourths of a distributor’s operating expenses to be people, many of whom are salaried.

This is the core of the issue. If salespeople are paid based on net profit, the easiest way for them to increase net profit (and thus, grow their income) is to eliminate unprofitable sales. 

Yes, reduce sales to increase profit.

Reducing sales to increase profit is a dicey strategy. Not a bad strategy, but a strategy that requires real expenses (not allocated expenses) to decline at a rate equal to or greater than the rate at which gross profit dollars are declining. After all, the unprofitable sale probably isn’t truly having any impact on the company’s IT cost or how much the CFO is paid; it’s simply absorbing an allocated charge.
Here’s how the strategy works: 

1) Sales rep abandons unprofitable business causing sales to decline
2) ABC territory net profit increases because allocated costs exceed gross profit for these sales so the sales rep makes more money
3) actual company costs remain roughly the same, and company has fewer gross profit dollars to pay its bills
4) net profit at the company level declines. 

This, in a nutshell, is the reason commissions based on profit can result in sales problems and is often abandoned.

A Better Approach Cost Per Order/Line and Load Percentages

That said, the reasons distributors are looking at net profit as a potential basis for paying salespeople are legitimate. Voodoo accounting or not, we all know that a $5 order at 30 percent gross profit delivered to a customer in the next county is a money loser. This deficit is further amplified when a salesperson is also paid a commission or gets credit toward his gross profit bonus goal.

The goal of better aligning sales rep pay with the economics of the business is an admirable one.The good news is that there are ways to incorporate key profit drivers into a sales compensation program without taking the profit plunge. One approach is to eliminate the allocation of costs that are truly unrelated to transactional volume and focus in on costs that could be justifiably incurred as a result of the transaction.

Delivery, warehousing labor and order processing costs would fit this description. It’s true that warehouse labor and order processing costs are people costs that come in increments of tens of thousands and not tens of dollars, but staffing levels for inside sales and warehouse are much more elastic than IT system administrator or CEO.

A simple analysis can quickly lead to a "cost to fulfill an order". Applying this cost to every order to arrive at a commission able gross profit or incorporating a minimum order for commission can better align sales rep rewards with company profitability. If done properly, this approach can nearly eliminate the “shrink to profitability” dynamic because actual costs would be avoided if the orders were not taken. 

Direct Warehouse Employee Costs (50K/month)
Warehouse/Office Rent                (10K/month)
Shipping and supplies                 (3K/month)
Utilities and Misc.                       (2K/month)
Total Orders per month            1000
Total Order Lines per month       6000

Estimated Cost per order $6.50
Estimated Cost per line  $1.08 

Furthermore, if a portion of a rep’s business were not commissionable or the amount of gross profit on which commission were paid were reduced, growth would be required to make more money (and profitable growth at that). As a result, the “sell less, make more” scenario wouldn’t exist.

One potential issue with the minimum-order or order charge approach is that inevitably the impact will vary by sales representative. For some reps, the impact will likely be miniscule, while for others the impact could be significant. In these cases, using a multiplier approach to facilitate a level playing field may make sense.

The multiplier approach can be used many different ways. Goals or budgets would be established for each sales rep showing improvement on identified key cost drivers, and performance to this goal would regulate incentives that are otherwise paid on gross profit dollar production. 
Image result for sell more make more
For example, if order size is identified as a key cost driver, those with the lowest average orders would be expected to show the most improvement and have a goal set to that end. Missing the goal would result in a lower commission rate than is currently being paid or a 10 or 20 percent reduction in bonus earned depending on the structure of the existing incentive program. 

Calculating and displaying this data using the MDS-Nx Dashboard is automatic and using these metrics will help drive your profitability. Technology has made it much easier for distributors to analyze and model data in ways that previously not available. With tools like the MDS-Nx Software Suite , distributors have an opportunity to analytically understand profit drivers like never before. Distributors should be proactive in using this new-found knowledge. And when it comes to sales compensation, the more you know the better you will do.. .

Ready to sell more and make more? 

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556.
 Or send a message to

Click here and tell us how we can help you with your business solutions.