How to Build World-Class Analytics Capability - Modern Distribution Management

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How to Build World-Class Analytics Capability

Many distributors can build the strong data teams, but most distributors really struggle to use that data muscle effectively to move the business forward. Here's how to make it stick.
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This week, I’ve been prepping for great panel session at MDM’s SHIFT Conference about “How to Build World-Class Distribution Analytics Capability.”

I went back into my office and garage archives and pulled out a collection of printed complex manuals, supplier workbench programs, process improvement documents and much more. What I grabbed ranged from the comprehensive and complex (including a very heavy 266 pricing improvement playbook) to the simple: a single page 4 blocker visual from Texas A&M on basic customer stratification.

It really made me think about what mistakes most distributors make when building a world-class analytics capability.

Many distributors can build the strong data teams, but most distributors really struggle to use that data muscle effectively to move the business forward. If it’s just great data that we can’t action or get buy-in for to grow sales and profitability, then why are we doing the work?

Top 3 Tips for Building World-Class Analytics Capabilities

Start with Reality

Where are you today, and what reports your analytics team provide to the organization at all levels. Identify what reports and data it provides that are actually making a difference to improving sales and margin at each level.

For example: When I joined a team to lead pricing and inventory for a $2B plus distributor, we were creating eight weekly reports delivered on Monday to leaders and 12 other reports at various levels. These 20 reports were beautiful with amazing data, but the question no one could answer was how much they are used and for what purpose.

Since we didn’t know, we just turned off the delivery of the reports four at a time each week. We used our intuition to turn off the ones we didn’t think ever got used first and then just every week just didn’t spend the valuable time to create the reports.

Then we waited for the complaints. For the first four weeks (the first 16 reports we quit sending), not a single person asked for a missing report and that was humbling. With $2B in sales, we had a lot of associates who obviously were not using the reports to take action.

After six weeks, we and shut off all the reports and found that only three of the 20 actual reports we provided all that time and effort into were actually getting used. These three analytic reports were driving significant margin, inventory and sales improvements and of great value to that large distributor.

Double Down on the Outputs that Drive Value. Everything else is just noise. 

Invest in what makes a difference by putting full effort into the analytics that matter and get used by your customers (your fellow associates). Using the same example as above those three reports that were driving margin up, costs down and helping top-line sales growth, we invested in making them better. We added so many improvements over time and more data to make them even more actionable and impactful for the business.

Be smart about your business and your business mix and invest your resources wisely. For instance, I’ve joined teams that invested 70% of their effort and resources to create world-class system prices. It was amazing work, but our sales team only used system price 10% of the time and overrode all the system prices to the levels they needed to earn business.

So, we pivoted that 70% of effort to concentrating on providing better data to the salespeople to make better manual pricing decisions. As you might guess, this pivot over time increased our system price usage % dramatically and our gross margin percentage and profits grew well above our market competitors.

Create Reports that Matter for the Audience Who Receives Them

That massive excel file line level fill rate and lead time report that you create should not be sent to executive level.

Your purchasing team needs that detail report every day, but as you move up in the organization, you have to have condensed data and trends in very tight packages. The C-suite is packed with very smart people, but since they have to manage so many processes, you need to keep it simple. They need the summary reports that can help them identify the right strategy to implement.

Your most complex data will be used at the order writer, purchasing team and inventory level, where they need the added detail. As you move up in the organization, your reports must simplify and condense. This is often overlooked by many great analytics teams and can lead to frustration and lack of results.

Without organizational buy-in, your analytics team will be just moving numbers around on the page, and will never execute and truly add value or improve profit levels. Build a team that is supported and work tirelessly to get that organizational buy-in.

To be truly effective, you have to find that right mix of where to deliver comprehensive data and where to provide summary data at all levels.

Meanwhile, I hope to see you live at MDM’s SHIFT conference next week!

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