I read in the newspaper a few weeks ago about a Russian research team in Antarctica that after decades of drilling through 12,000 feet of ice reached the largest underwater lake on that continent, roughly the size of Lake Ontario. It has scientists around the world excited because they will gain access to a potential treasure trove of scientific data about life on this planet millions of years ago – a time capsule of immense value.
I couldn’t help but think about the profit potential many good distribution companies have when I read that. MDM recently hosted a webcast with Jonathan Byrnes, an authority on profitability management and contributing author to MDM through his blogs. Jonathan’s life work has been about helping companies, including many distribution companies, drill down and fully tap the reservoirs of profitability that exist today in good companies. The focus of our program, the second in a quarterly series on profitability, was on supply chain finance, and why successful suppliers will be those who radically differentiate their service offerings and relationships with customers.
How do you do this? As Dr. Byrnes outlined, this critical shift requires segmenting customers and getting out of the “one-size-fits-all” mindset. So many distributors don’t allocate their resources based on account potential. Instead, they have developed such a strong service ethic over decades that the “fire hose” gets directed at every account, regardless of size, fit or potential.
The point is to not reduce service to certain customers, but to create very clear definitions of customer service for specific segments. The matrix Dr. Byrnes used includes stable, emerging, integrated and strategic account segments. One of the first steps to undertake this transition is to define the different service promises for each segment. The effort needs to elevate this process beyond sales, which traditionally has directed service definition as the frontline to the customer.
Account management and service differentiation becomes an integrated effort that includes sales, marketing and finance. Once the customer relationship definition is clear across departments, it opens the door to a much more strategic and efficient use of resources with existing customers, as well as positioning to exploit opportunities for growth.
This program is available through our on-demand webcast library or on DVD at www.mdm.com/operatingforprofit. The first program in this series, Leading for Profit: How to Conduct a Profitability Turnaround, is also available and provides insights on shifting a company’s culture to one that is profitability-focused.