www.quantumprofitmanagement.com Quantum Profit Management
The Benefits of a Cost-to-Serve Math Program

Bruce Merrifield, President — Merrifield Consulting

•profit analytics •distribution management best practices •Wholesale Distribution Industry •new opportunities for distribution industry •personnel development •leadership training •designing customer education •cost-to-serve math •cost-to-serve in distribution

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In this video interview, Randy MacLean and Bruce Merrifield discuss the cost-to-serve (CTS) math course that Bruce recently put together with iKlarity. This includes details about the course structure as well as its benefits, origin, and an explanation of why distribution companies like yours may find it useful.

"The course consists of 50 separate 5-minute videos," Bruce explained. "Each video includes a quiz with some 'homework questions.' If the viewer can't answer the questions, they can always re-watch the video and that repetition helps them understand and internalize the information. You could further reinforce each video with some group discussions."

"After the viewer goes through all the videos – whether it's the full 50 or as many as you feel that they need – then you have a little final exam which takes some of the questions from previous quizzes," Bruce continued. "Everybody would ideally take the exam as many times as needed to get 100 on the test. If they missed a question, they could go back to the relevant video."

"What will be different about somebody once they finish the course?" Randy asked. "What will they have that they didn't have before?"

"Most people have been raised in a world where we only look through the financial management lens," Bruce said. "That viewpoint is necessary for a lot of functions, but it doesn't show things like CTS."

"Following only the financial viewpoint will lead your company to do a lot of dysfunctional things," Bruce added. "Sure, it might be okay as long as the competition is equally dysfunctional, but if you had the tools to do better, wouldn't you want to use them? Would you rather go to war using guns or bows & arrows?"

"By using these principles, you can find ways to command a larger and more profitable share of your market," Bruce said. "It's also the kind of a tool that complements what you learn and get through Waypoint Analytics."

"There are two things that distributors need to focus on when running their business," Randy added. "The first is making sure that you're generating enough gross profit to run your operations. Historically, distributors do a great job in this area."

"The second thing is controlling the CTS and ensuring that it's always less than your gross profit so you're making money on every sale," Randy said. "Because most distributors don't put much thought into managing this second area so there's more room for improvement. Many companies that manage their CTS well are turning in a bottom line that's two to three times greater than that of the average distributor. However, this first requires mastering new skills and acquiring an ability to look at the business from a different perspective."

"The genesis of this project is that I was talking with two WayPoint clients who understood the concepts and were absolutely hitting it out of the park," Bruce said. "One company went from $15,000 operating profit per employee to $75,000 operating profit per employee in 30 months and was even giving out some substantial gain-sharing bonuses in the process. In the second full year, everybody in the company – including warehouse workers and drivers – got a $6,600 bonus."

"However, these clients had a problem," Bruce continued. "Although they knew the material really well and were able to get results in their business, they realized that some of their employees just weren't getting it. These employees either didn't understand how things were supposed to work or were just ignoring the new ideas."

"One of the companies had to let go of a vice president because he couldn't wrap his head around the idea that not all sales are good sales," Bruce said. "Then you had a lot of front-line guys who wanted to take every call and treated all customers the same way instead of prioritizing the most important customers."

"The clients wanted to find a way to get a pure, unadulterated message throughout their organizations," Bruce said. "A system where everybody learned the same material so they'd understand the benefits and act accordingly. This prompted me to partner with iKlarity to put together this course since, as a video series, it doesn't matter if you have 1 location or 50 locations because each location has access to the same material."

"The course is broken up in a way that you can either teach your employees the basics or give them a comprehensive understanding," Bruce said. "And, since it's online, the course also has a very affordable and convenient delivery method."

An understanding of CTS is central to obtaining benefits from the WayPoint systems and Bruce's new course outlines many of the principles beautifully. The course is a great way for distributors to raise the skill levels of their employees and get everybody in the organization focused on the things that are going to improve the company's overall profitability.

For more information about Bruce Merrifield, visit: www.merrifieldact2.com

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