Best Buying: Buying Group Tips, Tactics and Tools II

Best Buying:
Buying Group
Tips, Tactics and
Tools II
• Best Buying: Buying Group Tips, Tactics
and Tools II
• Grady Taylor
– TriMega Purchasing Association
• Peter Burch
– Source Office Products
• Norman White
– Newtown Office & Computer Supply
• Martin Woodward
– Miller’s Office Products
• Dave Guinn
– Office Products Consultant
A Trip Back In Time . . .
• Last Year’s Presentation
• Many Years Ago
– Supply Chain
• Weak, inconsistent, and unreliable
– Result?
• Stocking and Merchandising
– Many dealers had twice-daily deliveries – HAD to stock
– Most markets – wholesaler trucks were not arriving at night
– Wholesalers had historically dismal fill rates
– Necessary effort to drive sales to the products you stocked –
Merchandising 101
Merchandising 101
• Driving Sales to the Products You Make the Most Money
• Driving Sales to What You Have in Stock!
• Equals =
– Higher Service Levels
– Higher Gross Profit Margins
• Limited number of players in the field, although it sure
didn’t feel that way!
A Fork In The Road
• Wholesaler Stepped Up Their Game
– Established Dealers
• Continued their stocking paradigm
• Financed growth by destocking
– “Noveau” Dealers
• Entered the business with the wholesaler financing their balance
sheet
• Focused on marketing/selling
– Some of the Results?
• More players than ever
• Small competing with Big
• Virtual on a level playing field with Stocking
Two Camps Today
• Stocking Dealers – look to buy better, smarter, with better
utilization of working capital
– “thoughtful” stocking
• Non-Stocking (semi-stocking) Dealers – looking to
compete on larger enterprise accounts and bid scenarios
– “crazy” stocking
– [presenter’s note: Enterprise Accounts and the Non-Stocking
Dealer – more times than not, an untenable circumstance]
Non-Stocking Dealers
• “Crazy” Stocking
– Not bringing anything in.
– No way, shape or form.
– I’ll bring in inventory when
pigs can fly!!!
Stocking Dealers
• How much of my inventory is performing Adequately?
• Define Adequately?
– Balance Sheet – Working Capital
• Current Assets/Current Liabilities – 1.5 or better
– Inventory Turns
Sell it
Before You
Pay For it!
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COGS/Average Inventory
Stock Sales ONLY – nothing presold [no wholesale]
$187,500/$200,000 = .9375 X 12 = 11.25
One Turn = $13,500
Should be over 10, preferably 12+
– Sludge
– Dollars v. Percentages
• Low-dollar, high velocity item
• High-dollar, semi-high velocity item
– Remember – DeStocking is as important as Stocking!
A Moving Target
• Wholesalers change their prices –
– Quarterly
– Monthly
– Whenever they damn well please …
• How do you make a decision when the target is constantly
moving?
• One wholesaler raised prices on over 2,400 items IT items
alone on October 1st, of this year [call your TriMega office
when this happens]!
• And it’s just about NEVER the K.V.I. Items!
• Become more dependent on your
salespeople/wholesaler? No real differentiation.
What’s The Biggest Cost Of Your Dealership Each Month?
• Salaries?
• Rent?
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Botox appointments?
Country Club Membership?
Cost-of-Goods!!
How much time do you spend on keeping salaries down,
versus time on COGS?
So, What To Do?
• Stocking Dealers
– Easy. Just bring it in.
• Non-Stocking Dealers
– Two choices –
• Bring it in
• Negotiate a contract price
– ‘No’ to dead-net
– Price held?
How Do I Find These Profit-Lost SKU’s?
• Wholesaler Usage
– SPR
• Consolidated by Rollup Account Customer Usage
– USSCO
• Unitrol Report
– TriMega Direct Cost File
– Rolling 12-month usage
– Vendor
• Avery, Smead, Acco, HP
Most Profitable Wholesaler Lines
• Avery
• Private Label
– Universal, Sparco, BSN, Elite, Innovera
– BSN x-ref
• Acco
• Smead
• If they’re profitable to the wholesalers, then there is
opportunity for you as well!
Sample “Finds”
Hewlett Packard?
Private Label
Dealer Case Studies
• Norman White
– Newtown Office & Computer Supply
• Peter Burch
– Source Office Products
• Martin Woodward
– Miller’s Office Products
Norman White
• Varied Industry Background
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Started small dealership in Texas
United Stationers- Sales, Sales Management and Marketing
Allied Office Supply- SVP Marketing
Newtown Office Supply
Currently serving on Trimega’s Marketing Committee and Point
Nationwide Board of Managers
About Newtown Office Supply
 30 years in Business
 Grown our Business in a Difficult Business Environment
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Investment in People and Systems
Pricing Integrity
Exceed Customer Expectations
Extremely Customer Focused
Support our Customer’s Community Outreach
 Sales/ Staffing
 2006
 2012
$3.5 million and declining with 15 employees
$9.0 million and growing with 24 employees
 Low Stocking/ Willing to Change
Current Stocking Position
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Copy Paper (10)
Coffee (85)
Water/Soda (19)
Janitorial (6)
Limited Office Supplies
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At A Glance- Seasonal (4)
Avery (18)
Quality Park (14)
Macco (7)
Fellowes- Seasonal (5)
Occasional HP buys (30-40)
Inventory Turns
• 18 turns per year
– Heavily weighted by Copy Paper- 1 truck per week
Methodology
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High Trimega Rebate- > 10%
Low Minimum Order for Free Freight
Item cost > $5.00
Turn inventory in 30 days- 12 turns
Utilize Acsellerate to analyze sales
Focus on additional GP$ not GP%
Examples
Item
Description
Qty
Sales
Ave
Orde
rs
AVE11446
INDEX,MAKER,LSR,PCH,5TAB
86
$7,376.95
$85.78
46
MARKER,PERM,SHARPIE,FN,BK
666
$3,966.00
$5.96
394
QUAR1460
ENVELOPE,TYVEK,PLN,9X12,WE
40
$1,648.47
$41.21
26
ZEB22210
PEN,BALLPT,RT,1MM,ZGRIP,BK
232
$1,019.00
$4.39
MMM654YW
POST-IT,PLN,3X3,YW
144
$1,426.00
SEL44169
MAILER,CD-ROM,JIFFYLITE
28
$647.34
SAN30001
Wholesal
e
Direct
X Wholesale
$75.95
$47.02
$6,531.70
$4,043.72
$2,487.98
$6.58
$5.66
$4,382.28
$3,769.56
$612.72
$33.76
$19.98
$1,350.40
$799.20
$551.20
71
$3.80
$2.47
$881.60
$573.04
$308.56
$9.90
92
$10.25
$8.80
$1,476.00
$1,267.20
$208.80
$23.12
21
$14.39
$11.92
$402.92
$333.76
$69.16
X Direct
$ Diff
$4,238.42
What can cause us to add items?
• Janitorial Category
• Success of Point Nationwide
• Utilization of Trimega Marketing
Peter Burch
Peter Burch
Card Throwing Techniques
Variety of Roles
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Furniture Installer 1979
Service Manager
Warehouse Manager
Controller
VP Operations
Software Developer
CFO
COO
CEO
About Source Office & Technology
 Since 1991 Evolutions
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Thermal Fax
Toner
Remanufacturer
Printer Service
Office Supplies 1999
Trimega 2005
OneSource MPS 2008
Source Coffee Bar 2009
iPrint 2009
Canon Dealer 2010
Imaging Software 2012
Smoothies Coming Soon
About Source Office & Technology
 Sales
 2008
 2011
$22 million
$36 million
 Inventory Challenges
 Multiple Locations (6)
 Lines of Business
 National Accounts
 Acquisitions
SKUs
19
71
Paper
271
169
Supplies
Canon
Toner
Reman
JANSAN
iPrint
72
54
120
Stocking by number of SKUs
Denver
Cost
$55,905
$31,486
$60,670
Paper
$75,325
Supplies
Canon
$146,522
Toner
$599,819
Reman
JANSAN
iPrint
$161,489
Stocking by Dollars in Inventory
Inventory Turns
• Sales from Inventory
– $6.74 Million
– $1.13 in Inventory (12/31)
– 6.0 turns per year
Inventory Turns
• Sales from Inventory
– $6.74 Million
– $0.82 in Inventory (8/31)
– 8.2 turns per year
Inventory Turns
• Sales from Inventory
– $6.74 Million
– $.5 million in Inventory excluding specials
– 12+ turns per year
Methodology
• Dollars Not Percentage
– Low Hanging Fruit
– Number of Picks
– Minimum Orders
Methodology
– Price Opportunity
• Price Increases
• Volume incentives
• Special Deals
– Marketing Opportunity
• Products not available elsewhere
• Branded Product
Methodology
• Stock What you Sell
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Review Usage
Review By Class and Sub-Class
Vendor Cross Reference
Generic to Generic Conversions
Generic to OEM Conversions
Methodology
• Sell What you Stock
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Substitute
Substitute Some More
Generic to Generic Conversions
Generic to OEM Conversions
OEM to OEM Conversion
Contract Source Brand Commodity (SAV)
First in Search
Switch and Save
Take Away
• Pick A Vendor
– Suggest SMD,EVE,WLJ or AVE
• Preferred Trimega Suppliers
• Great Rebates
• Common Items
– One Vendor Gives you larger order size
– Go 10 to 20 Deep
– Start Monday
Martin Woodward
• Industry Background
– The Supply Cabinet – Distribution Management
– Guernsey Office Products – Distribution, Purchasing
and Service Management
– Miller’s Office Products – VP of Operations
– Currently serving on Trimega’s Purchasing Committee
and Catalog Committee
About Miller’s Office Products
 42 years in Business
 Business Breakdown
 20% Coffee and Beverage
 25% Tax Supported (Primarily Federal Government)
 10% Furniture
 10% Drop Ship
 Remaining Sales are traditional Office Products to
Commercial Accounts
 Approximately 50% of Non Drop Ship Sales from Stock
 Sales / Staffing
 $40 plus million and growing with 112 employees
Current Stocking Position
• 1,800 Total Stock Items
• 507 Break Room Items
• 312 Legal Indexes
• 130 Imaging Items
• Remaining SKUs traditional Office Supply Items
Inventory Turns
• 9.5 turns per year
– Large $$$ Inventory Buys significantly impact number
of turns.
Methodology for Adding Items to Stock Inventory
• Usage is reviewed 3 times a year.
• Detailed analysis of W/L sales data:
– Sales $$$
– Number of Customer’s that purchase
– Large Order Volume
– Hits
– Usage
– Tech, Special Order, Furniture, Seasonal Items
Methodology for Adding Items to Stock Inventory (cont)
– Compare net monthly wholesale cost to net monthly
direct cost.
– Goal is to have a net monthly savings of $50.00 per
item per month.
• Other Inventory Decision Steps
– Contracts
– Behavior Review
Where Do I Start?
• Dave Guinn
– Office Supply Savant
• Industry veteran for over a hundred years
• Boise, BT/Corporate Express
– TriMega –
• FSSI/GSA Program
• PNW Infrastructure
Direct Buy Ladder Rung #1 – Space
• Space Cost Compared to Margins Gained?
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Floor Space (costar.com for budget)
HPL – heat, power, light
Mobile Equipment
Shelves and Rack
Insurance ( Facility and Employees)
Additional Staff
Direct Buy Ladder Rung #2 – Product Lines
Tangibles
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Margin Gain [Gross Profit$]
Factory Minimums [Working capital]
Factory Lead Time [Working capital]
Drop Ship Minimums [Working Capital, Gross Profit]
Intangibles
– Representation Quality
– Deviated Cost Support
– Promotional Support
Direct Buy Ladder Rung #3 – Products
Tangibles
– Margin Gain [Gross Profit$ per unit]
– Density [Margin $ per Sq.Ft.]
– Rapid rebuy turnaround [lead-times and minimums]
Intangibles
– Competitive Benchmark Product - KVI
– Differentiation
– Damage [Shipping, Perishable, Dates]
Note: Once an item is selected, comp plans and the web should
favor Direct Buy items
Wrapping Up
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We – of course, skimming a very fundamental issue.
Also, this is not a philosophical debate
This should be not be wrapped in emotion
Cold, hard facts
Buyers should be active BEYOND the daily grind of
rebuying
Do not assume the wholesaler’s merchandising strategy is
in your very best interests
Think Strategic and not just Tactical
There are right-buying decisions out there – you just have
to find and exploit them!!!
Achieve higher margins, make more money!
What Now???
• Want to navigate this process?
• Too overwhelming and need help?
– Grady Taylor
• [email protected]
• 847-627-4182
– Dave Guinn
• Questions????