Documenting Value to our Customers
description
Transcript of Documenting Value to our Customers
September 24 & 25, 2008
Documenting Value to our Customers
NAW – Large Company CEO
Panel Discussion
September 24-25, 2008 2008 NAW Large Company CEO Conference
Margin Erosion
• Steel, energy, plastics and other costs are going up;
• Customers are putting pressure on suppliers for a lower price;
• Every dollar of margin lost translates to a direct dollar loss in profitability;
How have these market trends impacted your profits?
Purpose of Documenting and Selling Solutions
September 24-25, 2008 2008 NAW Large Company CEO Conference
Contractual Savings
• More end-users are relying on TCO savings to meet cost-reduction targets;
• How many millions of dollars in sales do you have tied to contractually guaranteed savings?
• In many cases companies have dropped prices to meet these goals or even paid the customer cash penalties;
Tools for documenting value result in higher margins and satisfied customers.
Purpose of Documenting and Selling Solutions
September 24-25, 2008 2008 NAW Large Company CEO Conference
74 % - Yes
26 % - No
End-users were asked if the ability for a distributor to provide documented cost savings would enable the distributor to earn a larger portion of their business:
Source: Value Added Partners
Purpose of Documenting and Selling Solutions
September 24-25, 2008 2008 NAW Large Company CEO Conference
Benefits
• Establishes a clearly defensible competitive position; • Creates long-term partnerships with key customers;• Results in increased profit opportunities;• Opportunities for share gains.
Key Consideration
• Choosing the right customers;– Who and who not to offer the services to;
Purpose of Documenting and Selling Solutions
September 24-25, 2008 2008 NAW Large Company CEO Conference
Assessing the Opportunity
Identifying the right accounts*;
Partner vs. Price;– Creating and documenting value takes time and
commitment on both sides;
– Long-term alliances;• Access to multiple levels of contact;
– Focused on value and not simply transactions;
– Genuine desire for win-win relationships.*John Monoky, Univ. of Michigan; Strategic Account Management
September 24-25, 2008 2008 NAW Large Company CEO Conference
Sales Strat Value Documentation
September 24-25, 2008 2008 NAW Large Company CEO Conference
Sales Strat Value Documentation
September 24-25, 2008 2008 NAW Large Company CEO Conference
Documenting Value
How many ways can we reduce TCO?
– IT investments have helped many companies find new and unique ways to create value.
– Activity-Based Costing software helped Lewis-Goetz identify;
• those accounts where we should focus our TCO savings efforts;
• And, those where we should not.
September 24-25, 2008 2008 NAW Large Company CEO Conference
Profit and Loss ScorecardStrategic Customer Case Study
September 24-25, 2008 2008 NAW Large Company CEO Conference
Order History
Customer Invoice Invoice Ship Shipment Opening Number Number Date Date Method Balance
41. 075553 5455459 12/13/2004 12/10/2004 UPS $41.44
42. 075552 545511 12/13/2004 12/10/2004 Our/Del $3.88
43. 075537 545414D 12/14/2004 12/10/2004 UPS Red $42.31
44. 075585 545933 12/14/2004 12/13/2004 Our/Del $482.62
45. 075586 545935 12/14/2004 12/13/2004 Our/Del $264.54
46. 075587 545936 12/14/2004 12/13/2004 Our/Del $38.16
47. 075613 546346 12/15/2004 12/14/2004 Our/Del $768.49
48. 075614 546347 12/15/2004 12/14/2004 Our/Del $42.90
Strategic Account Case Study
Activity-Based management has been able to identify unprofitable, time consuming
orders.
September 24-25, 2008 2008 NAW Large Company CEO Conference
Conclusions
Numerous orders were small and timely. Over a three week period the following occurred:
32 orders processed;
Total revenue - $7,178;
Average Order Size - $224;
18 orders were under $100.
Each order required work to be done by inside sales, administrative, and hydraulic shop personnel. This results in substantial costs at both Lewis-Goetz and the customer.
Lewis-Goetz uses Activity-Based Costing management as both an internal analytical tool as well as an external value-added tool.
Strategic Account Case Study
September 24-25, 2008 2008 NAW Large Company CEO Conference
Conclusions
• Key customers are demanding TCO reductions;• Clearly understand which customers deserve and
value a TCO approach;– Focusing on TCO reductions takes emphasis off price;– Opportunity for longer-term relationship;– More difficult for business to be taken.
• Investing in IT tools will help with;– Identification of accounts that should be a focus of TCO
documentation;– Identifying unique ways to create value;– Documenting the value that is created through your supply
partnership.
September 24 & 25, 2008
Thank you.