Tilting the Playing Field Action Plan Way Point

Tilting the Playing Field Action Plan ©Way. Point Analytics

You Can… Ø deliver top-quality product Ø provide noticeably superior service Ø have the lowest price Ø AND… have the highest profits ©Way. Point Analytics

Randy Mac. Lean Ø President of Way. Point Analytics Ø invented new costing models & new profit metrics for distribution Ø monitor & advise on over $60 B Ø author of books & articles Ø NRA-certified instructor & ballroom dancer ©Way. Point Analytics

P & L Vernacular Terms We Love ©Way. Point Analytics

Revenue Cost of Goods Gross Profit $20, 330, 947 $15, 843, 924 $4, 487, 023 22. 1% Selling Expense Order Entry Exp. Whse Expense Delivery Expense G&A Cost-to-Serve NBC $646, 194 $145, 222 $752, 570 $515, 047 $941, 937 $3, 000, 970 14. 8% $1, 486, 053 7. 3% Sales Comp Operating Profit $1, 195, 954 $290, 099 1. 4% ©Way. Point Analytics Gross Margin Rate (GM%) Cost-to-Serve Rate (CTS%) Net Before Comp Rate (NBC%) Net Before Taxes Rate (NBT%)

Concepts ©Way. Point Analytics

What if you had the whole market to yourself? ©Way. Point Analytics

Trading Customers Us customers ©Way. Point Analytics Them

How Money is Made Really! ©Way. Point Analytics

How Money Is Made $GP $CTS ©Way. Point Analytics 10

How Money Is Made $Gross Profit - $Cost-to-Serve $NBC (profit) 11

What Makes Gross Profit $GP = $revenue X margin% + fees

What Drives Cost-to-Serve $CTS ≈ orders picks invoices deliveries ©Way. Point Analytics

margin% add-on fees deliveries $revenue orders invoices picks ©Way. Point Analytics

How Money Is Not Made $3 $7 $5 Bottom Line 15

How Money Is Really Made $10 ($25) ($50) Bottom Line 16

Whale Curves ©Way. Point Analytics

Whale Curve PIP (Peak Internal Profit) $5. 5 M Realization 27% ©Way. Point Analytics

Customer Cross-Subsidies ©Way. Point Analytics 19

Would You Say This…? ©Way. Point Analytics

Customer Cross-Subsidies ©Way. Point Analytics 21

Competitors’ Whale Curves Gaining Control ©Way. Point Analytics

Your Company Your Competition ©Way. Point Analytics

CTS Confers Price Advantage Stokes Merrill Revenue $272, 743 Gross Profit $57, 703 Selling Exp $4, 454 Order Entry Exp $1, 611 Whse Exp $38, 212 Delivery Exp $8, 516 G&A $10, 279 Cost-to-Serve $63, 072 NBC ($5, 369) Millennium 22. 1% 3 orders / week 762 picks 4 deliveries / wk 3 invoices / wk 23. 1% Revenue Gross Profit Selling Exp Order Entry Exp Whse Exp Delivery Exp G&A Cost-to-Serve NBC ©Way. Point Analytics $261, 580 $43, 161 $3, 589 $1, 243 $21, 212 $5, 076 $7, 709 $38, 831 $4, 331 15. 8% 2 orders / week 423 picks 2. 5 deliveries / wk 2 invoices / wk 14. 8%

New Strategy ©Way. Point Analytics

Strategy: Road Map 1. concierge service 2. protect & build core 3. reform or trade profit drain accounts 4. new model for marginal 5. manage the trading process 6. lock in core with pricing ©Way. Point Analytics

©Way. Point Analytics

©Way. Point Analytics

Step 1: Concierge Service 1. select and train at least two people 2. dedicated space, phone, email, authority 3. customer advocates 4. “own” customer’s issues, and report status to customer 5. plan for customer-caused issues 6. continuous survey ©Way. Point Analytics

Step 2: Protect & Build Core 1. identify Core accounts by the numbers 2. isolate from impact of policy changes 3. sales to work on penetration 4. target direct competitors 5. use service and price to win 6. re-price where feasible ©Way. Point Analytics

Step 3: Work Service Drain 1. develop individual plans for Drain accts 2. objective: make profitable 3. management calls to work with accts 4. price & policy changes for uncooperative accounts (be willing to give them up) ©Way. Point Analytics

Step 4: New Model for Marginal 1. cut all optional costs o commissions o trade credit o delivery 2. organize for profit o self-service o reduced manpower 3. be willing to lose accounts ©Way. Point Analytics

Step 5: Manage Trading Process 1. be sure: o whale curve is changing o profit realization is up 2. target accounts are being won 3. drain and marginal accounts are leaving ©Way. Point Analytics

Step 6: Core Account Pricing 1. use expense rates to set pricing 2. ensure sales force is negotiating price vs costs 3. reprice core accounts as profits allow 4. lock in core accounts with price and service ©Way. Point Analytics

Strategy: End State Ø 50%-75%+ of the most efficient (profitable) customers in the market Ø profit generation 2 x industry rates at margins 5%-10% below market Ø market-leading concierge service and corresponding reputation ©Way. Point Analytics

Resources Ø Concierge-Level Customer Service Hurlbert Consulting Ø Online Sales Training i. Klarity Ø On-site Track Selling (with Way. Point) Max Sacks International ©Way. Point Analytics

Way. Point Analytics Ø low cost monthly subscription Ø fast implementation Ø no long-term contracts Call 480 -426 -9955 or visit www. waypointanalytics. com ©Way. Point Analytics