Industrial Distribution Program

Dwight Look College of Engineering

Distribution Competitiveness Guide

Global Supply Chain Laboratory
Industrial Distribution Program

High resolution version of this

publication can be downloaded for free
at [Link]

Advancing the Science of Research

Texas A&M Industrial Distribution Program

KNOWLEDGE
ADVANCEMENT

APPLIED
RESEARCH

GRADUate
program

Creating Competitive Advantage

Developing Distribution Leaders

KNOWLEDGE
DISSEMINATION

NEW INDUSTRY
NEEDS

Research Resources
Optimizing Distributor Profitability:
Best Practices to a Stronger Bottom Line
Available at: [Link]

Customer Stratification: Best Practices for

Boosting Profitability
Available at: [Link]

undergraduate
PROGRAM

Continuing
education

Educating Future Employees

Enabling Branch/Line Managers

TRAINING FUTURE
LEADERS

OPTIMIZING
DISTRIBUTOR
PROFITABILITY

Available at: [Link]

Pricing Optimization
Sales & Marketing
Optimization

Sales and Marketing Optimization: Developing

Competitive Value Propositions in Distribution

Lean Distribution
Warehouse Management
Transportation Management
Supply Chain Optimization
Supplier Management

ERP in Distribution
Available on [Link]

REVENUE - EXPENSE
ASSETS

eDistribution
Available on [Link]

Inventory Stratification
Forecasting & Replenishment
Transportation Management
Supply Chain Optimization
Supplier Management

DISTRIBUTOR PROFITABILITY FRAMEWORK

Linking Business Processes and Shareholder Value

SUPPLY CHAIN PLANNING

SOURCE

STOCK

STORE

SELL

SHAREHOLDER VALUE
BUSINESS
PROCESSES

SHIP

FINANCIAL
DRIVERS

GROWTH

PROFITABILITY

CASH
FLOW

ASSET
EFFICIENCY

SUPPORT SERVICES

Business Processes

Process Metrics
Total Landed Cost

Supplier Management
(Strategic Sourcing)
SOURCE

B
U
S
I
N
E
S
S

Inventory Management

Supplier Stratification
Supplier Relationship
Right Number of Suppliers

STOCK

Warehouse Management

SELL

SHIP

Lead Time and Variability

Inventory

Fill Rate

Inventory Stratification
What to Forecast?
Demand Classification
Forecasting Method

Forecast Accuracy

Product Placement
Location Type
Location Identification
Product Storage

Sales Force Stratification

Mapping Customers and Sales Force
Sales Compensation Techniques

Pricing Management

Customer Stratification
Cost-to-Serve Assessment
New Customer Identification

Marketing Management

Pricing Optimization

Revenue

Fill Rate
Total Landed Cost

Cost of Goods Sold

Accuracy and Efficiency

Revenue
Warehouse Payroll

Space Utilization

Warehouse Rent

Item and Location Accuracy

Sales Force Mix

Accounts Receivable

Customer Mix
Cost-to-Serve and Right Price

Revenue

Time-to-Market

Dispatch Management

Supply Chain Optimization

Credit Management

Finance Management

Change Management

Human Resource Management

Recruitment and Retention

Attrition

Marketing Expenses (Payroll, Promotion, Media)

ASSET
EFFICIENCY

PROFITABILITY

GMROII
CASH FLOW

Total Asset Turnover

Revenue Growth
Cash-to-Cash Cycle Time
Working Capital

GROWTH

GMROII
Revenue Growth

CASH FLOW

Gross Margin

GROWTH

Total Asset Turnover

EBITDA

ASSET
EFFICIENCY

PROFITABILITY

ASSET
EFFICIENCY

PROFITABILITY

CASH FLOW

Days Sales Outstanding

GROWTH

Total Asset Turnover

ASSET
EFFICIENCY

PROFITABILITY

EBITDA

CASH FLOW

S
H
A
R
E
H
O
L
D
E
R

Fixed Assets (Plant, Property, Equipment)

Transportation Expenses

On-Time Delivery

Warehouse Payroll

Accuracy and Efficiency

Revenue

Optimal Network Location

Fixed Assets (Plant, Property, Equipment)

GROWTH

Total Asset Turnover

EBITDA
Revenue Growth

Inventory

CASH FLOW

Operating Expenses (Transportation and Warehouse)

Revenue

EBITDA

Inventory

Invoice Accuracy

Accounts Receivable

Working Capital

Additional IT Expenses

Days Sales Outstanding

Training Effectiveness (Benefit-to-Cost Ratio)

Bad Debt (Write-Offs)

Time and Cost-to-Hire

Hiring and Training Cost

Retention Rate

Revenue

Accounts Receivable Turnover

EBITDA
Revenue Growth

ASSET
EFFICIENCY

PROFITABILITY

Revenue Growth

Data Integrity
Past Due Tracking Efficiency

GROWTH

Working Capital
Inventory Turnover

Optimal Resource Deployment

ASSET
EFFICIENCY

PROFITABILITY

Total Asset Turnover

Optimal Service Level

System Integration

Inventory Turnover

Revenue Growth

Routing Optimization
Loading Optimization

Network Optimization
Resource and Asset Alignment
(Supplier - Inventory - Customer)
Service Level Optimization

Working Capital

Gross Margin

Fleet Management

Customer Order Fulfillment

GROWTH

Inventory Write-Off

Asset Utilization

Product Picking
Order Delivery

Cash-to-Cash Cycle Time

Revenue Growth

Fleet Capacity Management

Fleet Cost Assessment

Carrier Selection and Performance

Days Payables Outstanding

Total Asset Turnover

Qualified Leads Per Marketing Activity

3PL / Carrier Management

Gross Margin

Inventory Turnover

Voice of Customer
Market Selection and Target Strategy

Information Technology
SUPPORT
SERVICES

Quality and Flexibility

Inventory

New Facility Location

SUPPLY
CHAIN
PLANNING

Accounts Payable

Inventory Mix

Cycle Counting

STORE

Payment Terms

Revenue

Product Receiving
Product Put-Away

Warehouse Fulfillment (Inbound)

Cost of Goods Sold

Growth Potential

When to Order? (Reorder Point)

How Much to Order? (Order Quantity)
Replenishment Policy

Sales Management

P
R
O
C
E
S
S
E
S

Supplier Selection
Supplier Performance

Financial Drivers

Finance Elements

CASH FLOW

V
A
L
U
E

GROWTH
ASSET
EFFICIENCY

PROFITABILITY

CASH FLOW

2008 Supply Chain Systems Laboratory, Texas A&M University

[Link]

[Link]/crdc

[Link]

Customer Stratification Model

Supplier Stratification Model

Customer Life (Loyalty)

High profitability
Sustained relationship
Low cost to serve
High volume

MARGINAL
CUSTOMERS

SERVICE DRAIN
CUSTOMERS

Low profitability
No relationship
High cost to serve
Low volume

VENDOR
CONTROLLED
OPPORTUNISTIC
CUSTOMERS

MARGINAL
CUSTOMERS

CORE
CUSTOMERS

SERVICE DRAIN
CUSTOMERS

Low profitability
Sustained relationship
High cost to serve
High volume

STRATEGIC
PARTNERS

Strong brand
Exclusivity
Service intensive
Low market control

Strong brand
Exclusivity
High market control
High profitability

OUT OF
CONTROL

DISTRIBUTOR
CONTROLLED

Weak brand
Saturation
Service intensive
Low market control

Weak brand
Product shortages
High market control
Short term

Supplier Performance

CORE
CUSTOMERS

Supplier Loyalty

High profitability
No relationship
Low cost to serve
Low volume

Margin or Profitability

Cost to Serve

Gross Margin

OPPORTUNISTIC
CUSTOMERS

Strategic Partners
Brand Equity
Exclusivity
High Profitability
Long-Term Opportunity
VENDOR
CONTROLLED

STRATEGIC
PARTNERS

OUT OF
CONTROL

DISTRIBUTOR
CONTROLLED

Low Profitability
Service Intensive
Competitively Intense
Customer Controlled

Their Business/
Your Money
Weak Brand
Saturation Distribution
Service Intensive

Sales Volume

Distributor Services

Pricing Framework
1

ANALYTICS
CUSTOMER AND
ITEM ANALYSIS

OPTIMIZATION
PRICING RULES
ENGINE

EXECUTION

Texas A&M Pricing

Methodology Impact

What-If
Analyses

(Real World Results - HVAC Distributor)

48.6%
36.3%

TRANSACTION DATA
Customer, Item, Geography
and Time

Customer stratification
Item stratification
Customers item visibility
Item unit cost level
Customer-item GM level

Recent price/margin
Recent cost
Customer max price/margin
Group max price/margin
Overall max price/margin

Potential GM$ improvement

System aided decision-making
Augmenting Factors
- New Customer
- Competitor price, etc.

18.4%
BEFORE

24.4%

AFTER

Branch 1
($3.3MM Sales)

21.8%

16.5%

14.9%

Branch 2
($4.2MM Sales)

Branch 3
($2.4MM Sales)

Branch 4
($11.4MM Sales)

DISTRIBUTION GROWTH FRAMEWORK

C
O
M
P
A
N
Y
V
I
S
I

Strategic Planning

Growth Dimensions

Growth Processes

S
H
A
R
E
H
O
L
D
E
R

GROWTH

Growth
Mechanism

CAGR (Compound Annual

Growth Rate)
>> Impact on Competitive
Advantage
>> Risk Quotient
>>

WHAT IS
THE MARKET?

Growth
Strategy

Growth
Drivers

GROWTH
ASSET
EFFICIENCY

PROFITABILITY

CASH FLOW

WHERE
ARE WE?

V
A
L
U
E

CAPABILITY
PROFITABLE GROWTH

Shareholders

Suppliers

GROWTH

Human and
IT Capital

Customers

HOW DO WE
GET THERE?

WHY SHOULD
CUSTOMERS
DO BUSINESS
WITH US?

ASSET
EFFICIENCY

PROFITABILITY

ASSET
EFFICIENCY

PROFITABILITY

CASH FLOW

CASH FLOW

C
U
S
T
O
M
E
R

RISK MANAGEMENT

Gross Margin (GM%)

>> Operating Margin (EBITDA%)
>> Cash Conversion Cycle
(DSO + DOI - DPO)

GROWTH

>>

GROWTH
FORCES

&
M
I
S
S
I
O
N

Financial Drivers

OPPORTUNITY

WHERE DO WE
WANT TO BE?

Metrics

2
GENERATING GROWTH

MANAGING GROWTH

SUSTAINABLE PROFITABLE
GROWTH

SUSTAINING GROWTH

Key Attributes:

Key Attributes:

Key Attributes:

INNOVATION

ALIGNMENT

VALIDATION

FOCUS

COMMUNICATION

CONSISTENCY

STRATEGIC FIT

ACCOUNTABILITY

STABILITY

Retention
Strategy

ASSET
EFFICIENCY

PROFITABILITY

SUSTAIN
GROWTH

Opportunity
Assumptions

GROWTH

>>
Capability
Assumptions

ROIC (Return On
Invested Capital)

S
E
R
V
I
C
E

CASH FLOW

2011 Global Supply Chain Laboratory

CRDBP

COUNCILFRRESEARCH

ONDISTRIBUTORBESTPRACTICES
An Alliance of the NAW Institute & Texas A&M University

[Link]

[Link]/crdbp

[Link]

GENERATING
G
ROWTH - BEST PRACTICES
How do we generate growth opportunities?
Growth Strategy

Growth Drivers

Account gap analysis

Customer stratification
Sales force effectiveness
Retention strategy
Value proposition update

LE VE R AG E
Account Penetration - Existing customers

P E N E TR ATE

Market gap analysis

Supplier collaboration
Competitive value proposition
Sales force performance
management
Selling process

Market penetration - New Customers

B R OADE N

Customer feedback
Pain point analysis
Growth mapping core customer
and strategic supplier
Product & service portfolio
management

New Products and Services

Industry
Dynamics

ADD
Sales & Marketing Channels

R E AC H OUT

Sales Force
Effectiveness

Customer
Relationships
GROWTH
DRIVERS

Market Segments

B U I LD
New Platform (multiple drivers)

I N NOVATE
Value Proposition Innovation

DIVE R S I FY
Line of Trade & Value Chain Function

Sales &
Marketing
Strategy

Market mapping
Technology developments
Customer need/convenience

Supplier
Relationships

Market segmentation
Supplier growth inputs
Competitive analysis
Industry trends analysis

Growth mapping core customer and

strategic supplier
Industry trends analysis
Competitive analysis

Customer feedback
Supplier inputs
Value chain analysis
Cross-industry best practices

Market mapping
Industry trends analysis
Competitive analysis

Metrics
Core customer retention rate
Core customer conversion rate
Share of wallet
Balance revenue reliance (risk)

New customer acquisition rate

Revenue from new (core) customers
New customer retention rate

Organic
Development

Acquisition

Growth from new products

and services
Value proposition leverage
Balance over-dependency

Growth from new channels

Change in competitive advantage

Growth from new territories

Value proposition leverage
(national accounts)

Growth mapping core customer and

strategic supplier
Mapping key competitors
Supply chain network optimization

Geography

E XPAN D

Best Practices

Growth
Mechanism

Merger

Strategic Alliance

GROWTH
ASSET
EFFICIENCY

PROFITABILITY

CASH FLOW

Growth from new market segments

Degree of variety in end markets
(risk factors)

Growth pipeline run rate

Growth from new platforms
Change in competitive advantage

Number of innovative efforts

Growth from innovate opportunities
Change in competitive advantage

Change in competitive advantage

Risk management
Growth from diversification

2011 Global Supply Chain Laboratory

CRDBP

COUNCILFRRESEARCH

ONDISTRIBUTORBESTPRACTICES
An Alliance of the NAW Institute & Texas A&M University

[Link]

[Link]/crdbp

[Link]

MANAGING
G
ROWTH - BEST PRACTICES
How do we manage profitability while growing?
Process
Groups

Profitability Drivers

GM%
SOURCE

OPERATING
MARGIN

CTS

SELL

Growth Challenges
Supplier proliferation
Product mix
Supplier's channel strategy
Channel power balance
Channel visibility

Supplier stratification & relationship strategy

Optimizing channel compensation
Channel growth strategy alignment
Leverage supplier performance

Margin pressure from growing customers

Lack of pricing strategy (value proposition)
Competency gap
Lack of support tools
Sub-optimal market mix

Sales force capacity vs customer coverage

Lack of sales-support productivity tools
Misaligned sales force incentives

ECONOMIC
DRIVERS

Best Practices

Customer stratification
Pricing optimization
In-built mechanism for early warnings
Active adaptation of value proposition
Market segmentation
Sales force size & structure
Sales force productivity (support tools)
Sales force compensation
Aligning customer, company and sales force

STORE

DSO

Warehouse capacity
Operating cost challenges
Customer service (accuracy & efficiency)

Operations (inbound & outbound) productivity - Lean

Economy of scale
Best practices sharing
Internal benchmarking

Growth Forces

Supplier
>> Sourcing Workforce
>>

Customer
>> Sales Force
>>

Customer
>> Operations Workforce
>>

OPPORTUNITY

Customer
>> Sales Force
>>

SHIP

BUSINESS
MODEL

CASH
CONVERSION
CYCLE

DOI

SELL

DPO
STOCK

SUPPLY
CHAIN
PLANNING

RESOURCE
DRIVERS

Transportation capacity
Transportation cost (routing & cubing / loading)
Customer service (on-time delivery)

Routing and loading optimization

Economy of scale
Supply chain network optimization
(Transportation vs Inventory)

Credit requests from growing customers

New Normal challenges

Customized terms based on customer stratification

In-built mechanism for early warnings
Active adaptation of value proposition

SKU proliferation
Product portfolio / mix
Cost Vs service trade-off
Fill rate challenges
Supplier performance

Inventory stratification
Focused forecasting
Dynamic replenishment
Inventory network optimization
Competency development

Credit, return and rebate policies for

product expansion growth strategies

Optimizing channel compensation through

strategic supplier relationship
Leverage supplier performance

Shareholders

Suppliers

GROWTH

Supplier
>> Customer
>> Cross-functional Workforce

GROWTH
FORCES

>>

Customers

ASSET
EFFICIENCY

PROFITABILITY

Human and
IT Capital

CASH FLOW

Supplier
>> Purchasing Workforce
>>

CAPABILITY

Human Capital
>> Information Capital
>> Organization Capital
>>

> HUMAN CAPITAL

> INFORMATION CAPITAL
> ORGANIZATION CAPITAL

SOURCE

Competency Gap
Talent attractiveness
Technology and applications infrastructure
Leadership gap
Lack of coordination, control & synergies
Organizational mobility

Human capital development

Information capital readiness
Strategic awareness and alignment
Customer-centric
Growth mindset
Creative leadership
Strategy & structure match

Shareholders
>> Leadership
>>

> FINANCIAL CAPITAL

SUPPORT
SERVICES

Ownership type
Access to growth funding
Investor attractiveness

Financial fitness through free cash flow and

operating productivity
Investor confidence

2011 Global Supply Chain Laboratory

CRDBP

COUNCILFRRESEARCH

ONDISTRIBUTORBESTPRACTICES
An Alliance of the NAW Institute & Texas A&M University

[Link]

[Link]/crdbp

[Link]

SUSTAINING
G
ROWTH - BEST PRACTICES
How do we sustain profitable growth against strategic risk?
Strategic Risk Factors

What Went Wrong

Root Causes

Best Practices

Assumptions about:
External market condition

Adjacency & acquisition failure

Lack of competitive
value proposition

Market conditions
and opportunity

Customized economic modeling

& business cycle forecasting

>>

Strategic planning
(Competitive forces analysis)

>>

Market intelligence
Customer collaboration
Alignment with core business
model, opportunity & capability

Economy

Opportunity potential
and alignment
Supplier
Retention

Market relevance of
value proposition

Industry
Structure
ASSUMPTIONS
ABOUT
OPPORTUNITY

Value
Proposition
Effectiveness

Disruptive competitor entry

Industry structure
and opportunity

>>
>>

Getting inside customer value map

>> Retention metrics & drivers
>> Loyalty recognition
>>

Growth Opporunity
Potential &
Alignment

>>
>>

Adapt value proposition for

relevance and competitiveness

>>

Understand supplier channel strategies

Align supplier & distributor strategies

Customer
Retention

Market segment
overdependency
SUSTAINING
GROWTH
MOMENTUM

>>

>>

End customer market

opportunity

GROWTH

>>

Lack of customer rationalization

>>

Process
Capital

Execution breakdown

>>

Information capital readiness

>>

Organization capital readiness

(Leadership, Culture and Alignment)

Financial
Capital

Acquisition integration
capability

Information
Capital
>>

Funding sources
(Reliability & Accessibility)

>>

Disaster recovery readiness

Supply chain risk management

Organizational
Capital

Competency gaps

CASH FLOW

Retention Strategy Customer, Supplier,

Human Capital &
Shareholders

ASSUMPTIONS
ABOUT
CAPABILITY

Supply chain disruption

Restructuring

ASSET
EFFICIENCY

PROFITABILITY

Human
Capital

Business
Continuity

Ability to deliver value

proposition effectively

>>

Human capital readiness

Human capital retention

>>

Decision Modeling
and Scenario
Planning

Strategic process performance

>>

Customer potential
and profitability

Strategy & Capability

Testing - Periodical
validation of
assumptions behind
opportunity and
capability through
unbiased assessments

Competency & talent retention

>>

2011 Global Supply Chain Laboratory

CRDBP

COUNCILFRRESEARCH

ONDISTRIBUTORBESTPRACTICES
An Alliance of the NAW Institute & Texas A&M University

[Link]

[Link]/crdbp

[Link]

Customer Stratification

Inventory Stratification

RESEARCH PROJECT

RESEARCH PROJECT

Best Practices H Actionable Results H Education

Best Practices H Actionable Results H Education

Distributor Process Framework

Distributor Process Framework

SUPPLY CHAIN PLANNING

STOCK

SOURCE

SUPPLIER

STORE

SUPPLY CHAIN PLANNING

SELL

SHIP

CUSTOMER

SOURCE

SUPPLIER

SUPPORT SERVICES

Stratification Model

Stratification Model

Education & Roadmap

Low profitability
No relationship
High cost to serve
Low volume

INVENTORY PROFITABILITY

Customer Profitability

MARGINAL
CUSTOMERS

CORE
CUSTOMERS

High profitability
Sustained relationship
Low cost to serve
High volume
SERVICE DRAIN
CUSTOMERS

Cost to Serve

High profitability
No relationship
Low cost to serve
Low volume

SELL

SHIP

CUSTOMER

SUPPORT SERVICES

Customer Loyalty (Life)

OPPORTUNISTIC
CUSTOMERS

STORE

STOCK

Low profitability
Sustained relationship
High cost to serve
High volume

Education & Roadmap

Optimizing
Distributor
Profitability

A
B

Best Practices
to a Stronger
Bottom Line

C
D
INVENTORY MOVEMENT

Customer Buying Power

Sample Results

Sample Results
$41.3 MM

100%

$188.1 MM

$39.6 MM

$16.3 MM

$5.1 MM

$23.3 MM

80%

$14.5 MM

$ 54.4 MM

60%

F. Barry Lawrence Senthil Gunasekaran Pradip Krishnadevarajan

$5.2 MM

$10.3 MM

$8.5 MM

40%
$10.3 MM

$81.3 MM
$16.7 MM

20%
$3.7 MM

0%

$4.3 MM

$12.8 MM

$2.3 MM

AVG. INV ($)

TOTAL SALES ($)

TOTAL GM ($)

D
C
B
A
NEW

Professional Development Programs

Intensive Customer Stratification Program

The Thomas and Joan Read Center at Texas A&M University is the only
university center in the United States that focuses on research and
education in industrial distribution. Our professional development &
educational programs are designed to increase your organizations
competitive advantage and profitability. We focus on relevant and
actionable education through proven methods and tools.

Deliverables
DAY 1

DAY 2

DAY 3

DAY 4
Customer Loyalty (Life)

EXERCISE: What would be the 4

types of customers at your firm?

EXERCISE: Sample Loyalty

Analysis
Cost-to-Serve (CTS)

EXERCISE: Sample Buying Power

Analysis

Bringing It All Together

Customer Stratification
Results Presentation
Customer Strategies

Customer Buying Power

EXERCISE: Customer Stratification

Impact on Shareholder Value

SELLANALYZERCUSTOMERSTRATIFICATION
SALES FORCE TIME REDEPLOYMENT WORKSHEET
OBJECTIVE
Redeploy Sales Force Time from Service Drain Customers to Opportunistic Customers and evaluate the impact on Return on Net Assets (RONA)

EXERCISE: Customer Lifetime

Value and Net Profit

DATA
Sales Force Time
Sales $
GM $
A/R $

Real-world
Implementation Results

Available Sales
Force Time

Total

Core

Opportunistic

Marginal

Service Drain

127,296
$ 148,265,879
$ 37,363,002
$
18,829,767

40%
60%
67%
27%

5%
8%
8%
7%

25%
10%
10%
23%

30%
22%
15%
43%

Current Sales $ by cust type

Opportunist
Core
$ 11,861,270 $ 88,959,527
Marginal
Service Drain
$ 14,826,588 $ 32,618,493

Lost GM $

New Total GM $
N/A

Additional GM $
N/A
N/A
N/A

Other Income & Exp $

$

Additional Var Op Exp $

N/A
N/A
N/A

Variable Op Exp $ per Order

Current EBITDA $
7,709,826

Fixed Op Expense $
$

Current Var Op Exp $

$
Lost Sales $
N/A
N/A
N/A

Current Total Sales $

$

New EBITDA $
Additional # Orders
N/A
N/A

N/A
Avg Order Size

# hrs freed
N/A
N/A
N/A

% hrs redeployed
N/A
N/A
N/A

37,363,002

N/A
N/A

Lost Sales $ per

redeployed hour
N/A
N/A
N/A

Current Sales Force Time (hrs)

6,365
N/A
N/A
38,189

14,406,254

Total Variable Op Exp $

15,246,922

Decrease in Var Op Exp $

N/A
N/A
N/A

Reduced # Orders
N/A
N/A
N/A

Avg Order Size

148,265,879

1,977

Total # Orders

15,246,922

75,000

Current RONA %
23.57%

Var Op Exp $ per Order

$

203

New RONA %

WORKING SESSION: Data

Preparation for Customer
Stratification Analysis

CASE STUDY: Chapters 9 and 10

from Customer Stratification Book

WORKING SESSION: Data

Preparation for Customer
Stratification

WORKING SESSION: Data

Preparation and Customer
Stratification Analysis

GUEST LECTURE: Customer

Stratification - Business &
IT Perspectives

ACTION PLAN: Presentation

Discussion and Questions

Discussion and Questions

Discussion and Questions

CERTIFICATE PRESENTATION

Current Opport. Sales + Additional Opport. Sales

Current [Link] [Link]

New Sales $ by cust type
N/A
N/A

Optimizing
Distributor
Profitability
Current Total Sales $

Balance Sheet Elements

ents

EXERCISE: Sample Profitability

Analysis

Additional Sales $
N/A
N/A
N/A

Current Sales $ / hr
1,864
N/A
N/A
$
854

Current Variable Op Exp $

EXERCISE: Sample CTS Analysis

Current Total GM $

Lost Sales $
N/A

Current GM %
25.2%
N/A
N/A
17.2%

Additional hrs allocated

N/A
N/A
N/A

Current Sales Force Time (hrs)

6,365
N/A
N/A
38,189

Customer Profitability

N/A
N/A

72 employees * 40 hrs per week * 52 weeks per yr * 85% efficiency = 127,296 hours per year
72
40
52
85%

Expected Sales $ per

redeployed hour
N/A
N/A
N/A

Profit & Loss Elements

Customer Buying Power

WORKING SESSION: Data

Preparation and Customer
Stratification Analysis

Customer Profitability

Customer Loyalty

Cost to Serve

Customer Stratification Overview

and Framework

148,265,879

DSO
40.6

N/A

N/A

New A/R $ by cust type

$ 5,084,037
4,330,846

90.6

Other Current Assets

57.5

365

Additional Sales $
N/A
N/A
N/A

New Total Sales $

Lostt Sales
L
S l $
N/A
N/A
N/A

New Total GM $

New Total A/R $

Sum

DOI

# days in a year

# days in a year

1,978,468
New Total Inventory $

New Total Assets

365
New Total COGS $

Fixed & Non-current Assets

$

6,153,034

Current Net Assets

$
32,705,777

Cash & Market. Securities

$

DPO

Notes Payables
32.5

Best Practices
to a Stronger
Bottom Line

New Net Assets $

1,990,029

1,427,456

# days in a year

New Total Current

Liabilities

New Total A/P $

365

New Total COGS $

Other Current Liabilities

$

2,404,335

Open Enrollment Programs

Discussion and Questions

F. Barry Lawrence Senthil Gunasekaran Pradip Krishnadevarajan

H Distribution Manager Certificate Program

H Executive Session on Best Practices
H Intensive Customer Stratification Program
H Intensive Inventory Management Program
H Optimizing Distributor Profitability
H Optimizing Distributor Growth and Market Share
H Pricing Optimization
H Sales and Marketing Optimization
H Advanced Lean Distribution

Intensive Inventory Management Program

DAY 1

DAY 2

DAY 3

Inventory Management
WORKING SESSION:
WORKING SESSION:

Overview
Inventory Stratification
Forecasting

DAY 4

DAY 5

WORKING SESSION:
Replenishment/Service
vs. Cost Matrix

WORKING SESSION:
Process Assessment
Stock Group

Key Performance
Attendees to Present
Demand Pattern
Attendees to
Indicators and EXERCISE
Results and Policies
Classification
Present Results

EXERCISE: Linking
Inventory Management
to Shareholder Value

EXERCISE: Inventory
Carrying Cost

Inventory Management
Challenges and Benefits

Inventory Stratification -
Replenishment Policies
Debrief and Discussion
Concluding Remarks

Deliverables

T y p i ca l I n v e n t o r y M i x

Id e a l I n v e n t o r y M i x

EXERCISE: Inventory
Management Recap

EXERCISE: Sample
EXERCISE: Forecasting
Replenishment Policies -
Stratification Analysis
Rounds 1 & 2
Continued

GUEST LECTURE:
Inventory Management
Business Perspective

WORKING SESSION:
Forecasting Continued
EXERCISE: ROP
Data Preparation for
Inventory Stratification

GUEST LECTURE:
Certification Presentation
Inventory Management
IT Perspective

Professional Distribution Sales

C
D

H Client Acquisition
H Key Account Development
H Inside / Counter Sales
H Sales Management

Discussions and
Questions

Best Practices
to a Stronger
Bottom Line

STOCKANALYZERINVENTORYSTRATIFICATION
INVENTORYREDUCTION/REDEPLOYMENTWORKSHEET
OBJECTIVE
Perform Inventory Reduction and Inventory Redeployment (to A & B items) and evaluate the net impact on Return on Net Assets (RONA)
DATA

CurrentInv$

CurrentSales$

CurrentCOGS$

Total
A
B
C
D

$ 17,470,663
28%
21%
25%
26%

$ 148,265,879
65%
18%
15%
2%

$ 110,902,877
65%
18%
15%
2%

Refer Current Turns

Current Sales $ (by item rank)

$
$

Current COGS $ (by item rank)

$
$

72,086,870
16,635,432

$
$

19,962,518
2,218,058

Current Inventory $ (by item rank)

$
4 891 786 $
4,891,786
3
3,668,839
668 839
$
4,367,666 $
4,542,372
% Inventory considered for
reduction / redeployment
N/A
N/A

Current Turns (by item rank)

14.7
3.8

5.4
0.5

Where do you want to

redeploy inventory (%)
N/A

Inv $ available for

reduction / redeployment
(by item rank)
N/A

N/A

Sum

Total Inv $ available for

reduction /

% Inventory for
Redeployment

% Inventory for
Reduction

N/A

Redeployed Inventory $

Reduced Inventory $

Expected Turns upon

Redeployment
N/A

N/A

96,372,821
22,239,882

Current Sales $ (by item rank)

$ 26,687,858
$
2,965,318

$
$

N/A

96,372,821
22,239,882

$
$

26,687,858
2,965,318

New Sales $ (by item rank)

Lost Sales $ (by item rank)

Lost Sales % due to Inventory
Reduction / Redeployment

Additional Sales $ (by item rank)

Redeployed Inventory $
(by item rank)

N/A

Sum
New Total Sales $

N/A

New Total GM $

N/A

New Total COGS $

COGS $ as %
of Sales $
74.8%

Current Employee Comp Outside

$

OpeeratingExpenses

Discussion and
Discussion and
Discussion and
CASE STUDY: Stock Group

Questions
Questions From Optimizing Questions
Distributor Profitability book

Optimizing
Distributor
Profitability
Profit & Loss Elements

EXERCISE: Inventory
Buy Decision - EOQ
Stock Out Cost

Texas A&M
multi-criteria
inventory
stratification

9,059,045

Current Employee Comp Others

$

9,385,230

Current Warehouse Exp

$

4,477,630

Current Delivery Exp

$

4 536 936
4,536,936

Current Other Op. Exp (G&A)

$

2,194,335

Current EBITDA $
$
7,709,826
Variable
75%

$ 6,794,284

Variable
10%

$ 938,523

New Total Sales $

$ 2,238,815

Variable
80%

$3
3,629,549
629 549

Variable
75%

$1,645,751

148,265,879

New EBITDA $

New Total
Var [Link]

Total Variable
Operating Exp

Variable
50%

Other Income & Exp $

Current Total Sales $

New Total Op Exp $

15,246,922

Total Fixed
Op. Exp
$ 14,406,254

Interest Income %

Interest Income

12%

Current RONA %
23.57%

New RONA %

Current Total Inventory $

Sum

17,470,663

New Total Inventory $

Reduced Inventory $
Other Current Assets
$

Balance Sheet
eet Elements

Inventory Stratification
Forecasting

Some of the unique characteristics of our programs are relevant learning,

distribution focus, research-based education, distribution domain experience of our faculty, and access to our research solutions and services.

New Total Sales $

1,978,468

Fixed & Non-current Assets

$

Current DSO

# days in a year

C
Currentt N
Nett A
Assets
t
$
32,705,777

Cash & Market. Securities

365

New Total COGS $

Current DPO

1,427,456

New Total A/P $

32.5

# days in a year

Other Current Liabilities

365

New Net Assets $

1,990,029

Notes Payables
$

F. Barry Lawrence Senthil Gunasekaran Pradip Krishnadevarajan

New Total Assets

6,153,034

NewTotal A/R $
46.4

2,404,335

New Total Current

Liabilities

Master of Industrial Distribution

H Designed for Working Professionals
H Web-based Program
H 21 Months to Complete
H Focused on Industrial Channels
H Global Distribution Trip
H Life-long Networking

College Station, Texas

Length of Program

21 Months
Study While Working Full-Time

Degree Format

Two 5 - Day Residency at College Station Campus

1 One - Week Global Trip
3 Day Capstone Presentation & Graduation at College Station Campus

Individual Capstone Project

September 30

PROBLEM STATEMENT AND

STEERING COMMITTEE MEETING

Global Distribution
Course & Trip

One Week International MID Trip During Second Year

Part of Global Distribution Course

Start Dates

August of Each Year

Admission

Admission Closes April 30th of Each Year

Fees

See Fee Fact Sheet

Residency Week 2012 Texas A&M Campus

58 Distribution Professionals Representing 56 Companies

November 15

PROJECT PROPOSAL
ROUGH DRAFT
PROJECT PROPOSAL FINAL DRAFT

Campus Location

Four 15 - Week Online Semesters

FOR MORE INFORMATION VISIT:

[Link]

November 30

Program Overview

Global Distribution Class

2012 MID Global Distribution Trip to Brazil

January 31

MID-TERM STEERING
COMMITEE UPDATE
February 28

FINAL PROJECT PRESENTATION

DRAFT (WEBINAR)
March 31

FINAL PROJECT PRESENTATION

TO STEERING COMMITTEE
April 15

>>

2007: Germany [TTI, Sonepar]

>>

2008: Italy [Marrazi Tile, Euro-Fer, Bosch Rexroth Oil

Find Out More...

Control, Smith Technologies]

>>

2009: China [Transmark, Rockwell, Brenntag]

>>

2010: Austria, Hungary, Czech Republic [Sonepar]

>>

2011: Spain & Portugal [Trane]

>>

2012: Brazil [Brenntag & Brightstar]

>>

2013: Norway & Sweden

>>

2014: India - Planned

Visit our website:

[Link]

FINAL PROJECT REPORT (DRAFT)

Real-time case studies in which distributors and their

suppliers provide a problem environment for students
to work on supply chain solutions.

>>

April 30

FINAL PROJECT REPORT

Each year, new case studies are prepared for a new

location with new problem environments to reflect
the changing challenges

>>

Mid May

CLASS PRESENTATION &

GRADUATION

INDUSTRIAL DISTRIBUTION PROGRAM

204 Fermier Hall, 3367 TAMU,
College Station, TX 77843-3367
Phone: 979-845-4984
Fax: 979-845-4980
Web: [Link]

Sign up to attend a MID

webinar and talk to an advisor
faculty and staff.
Contact our Program Office:
979.845.4984