Bruce Merrifield, President — Merrifield Consulting
•distribution management best practices •sales practices •profit strategy
Wednesday, May 14, 2014—Randy MacLean and Bruce Merrifield discuss Supply Chain Issues, or what Bruce otherwise calls "Schwarzkopf Issues".
Picture this, says Bruce, "as you do a customer profitability ranking report and get to the bottom of the report, you see what seem to be really good customers, because the sales are good, the margin always are good, but the transaction costs are even higher, so you're losing money." Among the possible causes for this loss are Schwarzkopf Issues.
Bruce names the phenomenon for General Schwarzkopf, who gave a speech which included a story about a time he was given a tour of a large military base. While on this tour, he noticed two guards sitting in a random hallway wearing their helmets with their guns in hand. After exchanging salutes, he turned and asked the two-star general next to him, "What are those guys doing here?" The other general replied, "I don't know. They were there when I got here nine months ago."
General Schwarzkopf then requested that the lower-ranking general ask around for an answer.
When the two-star general returned, he sheepishly explained, "Well, three years ago, they painted the doorway and were afraid that somebody would bump into it so they put the guards on duty there until it was dry. They just forgot to write the paperwork to take them off. So for every day of the last three and a half years, we've been protecting the doorway."
This isn't just a problem limited to military bureaucracies. "Between the silos of purchasing guys and production, you find weeds," Bruce explains, "And literally it could be just one quirky person who decides to do something."
A great example was a customer who received a lot of small orders packed separately on skids. The order could be something as simple as a roll of duct tape. Bruce recalls that you would, "see 15 skids going out to this one guy, because different people on the plant were ordering stuff and all and had to be delivered to the back dock on separate skids."
When the client investigated the policy, he found it was started three years earlier by a dock manager who, after hurting his back, made suppliers deliver everything on skids so he wouldn't have to get off the truck. The dock manager finally retired, but the policy had remained. Discovering and resolving this issue helped to turn the account profitable.
The takeaway is that one of the things you should be doing is asking questions. Why do we do this? Is this still necessary? Does it make sense for us anymore? Watch the video above for more stories from Bruce and a great discussion on how to handle issues such as these.
For more information about Bruce Merrifield, visit: www.merrifieldact2.com
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