I was reading the most recent issue of The Wholesaler and came across a great article by Jason Bader, an inventory management specialist. He essentially laid out four steps to improving your profitability, with a focus on inventory. We liked his suggestions, which you can read in detail; but, here’s our take on the basics and how you can master his tips with Eclipse and Zerion:
1. Understand your cost to serve and the profitability of each customer. Then, group your customers by profitability and make necessary changes to each group.
Zerion: This is a fantastic exercise, which can be done in the simple way he describes; or, it can be done in a more complex fashion using the Activity Based Costing function in Eclipse. While we agree that you can probably get by without doing the complete ABC analysis for the purposes he describes, having consistent access to how much a customer costs you is a good idea and can be worth the hassle … if you plan to make use of it. ABC involves assigning costs to the things you don’t bill for but cost you money, ultimately accounting for every dollar that your business spends. The functionality is not difficult to set up; however, determining all of your transaction costs can take some time. The information gained should be used to determine pricing for each of your customers.
2. Utilize varied compensation for the warehouse.
Zerion: Jason outlines some solid reasons to consider changing the way you pay your warehouse staff; and, we think it’s long overdue. We’ve seen distributors pay warehouse personnel based on performance; and, generally speaking, it seems to result in smoother, faster operations with fewer people. Eclipse doesn’t necessarily handle this kind of compensation program perfectly. It can be done with reporting, but requires some strategy and leg work.
3. Make use of your software!
Zerion: We put an exclamation point after this one because it completely encompasses what we preach everyday. If you’re not maximizing your technology investment, you might as well be standing on the corner handing out dollar bills to strangers. Eclipse is a powerful package for distribution; and, while we know it often seems easier to do it “your way,” or to leave things as they are, we can usually guarantee it isn’t the most efficient. We know it’s a vast system with lots of nuances; but, we make our living helping companies leverage Eclipse to do more, do it easier, do it faster or do it better. We can help. And, if you don’t want us to, we just ask that you find some way to make optimum use of the technology that is at your fingertips. It will serve you, if you let it.
4. Know what’s in your warehouse.
Zerion: This is another opportunity for Eclipse. Inventory management is the cornerstone of a profitable distribution business; and, as Jason said, think of your product as stacks of money and treat it as such. Know exactly what’s there, where it is and how profitable it is. Make sure your processes reflect a regular, solid analysis of your most important asset. Cycle counting, random and scheduled counts are essential and can all be done with Eclipse.