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30 FEDA News & Views Changing the Way You Cook since 1990 800.988.8103 360.650.1111 woodstone-corp.com STONE HEARTH & SPECIALTY Commercial Cooking Equipment Discover why OVER 14,000 OVENS, rotisseries, charbroilers, tandoors, and planchas have been SOLD IN 80+ COUNTRIES worldwide. Made in the USA. was given access to all the costs in the system. They would often quote based on the lowest cost without regard for future replacement. The fi rst step was to mask all the different cost fi elds and give the team visibility to one cost fi eld. This new cost fi eld was populated by taking the current replacement cost and adding a small percentage. Even without the small bump, the sales team would at least start at a realistic cost. In order to help the sales team drive prices up, a multiplier was added to the replacement cost. The percentage varied based on the product category. More sensitive categories were given a smaller multiplier, such as 1.005. Some less sensitive categories received multipliers as high as 1.055. Again, the dif- ference in percentage between replacement and standard cost was designed to help quoting salespeople raise prices. This company was very smart in the implementation phase and very transparent in what it was doing. After our gross mar- gin training session, management explained how this program would actually help its salespeople earn higher commission dollars. They also covered how this additional margin capture would allow the company to invest in better facilities, new lines and upgraded technology. By committing to transparency, its salespeople became partners in the program. As a result, the company has improved their actual gross margin based on moving average cost by over 2.4 percent over the same period last year. Currently, management is consider- ing going more granular within each product category and basing the multiplier on sensitivity within the category. In all of these examples, my clients realized that their gross margin success has more to do with internal infl uences rather than external pressures. This doesn't mean that you can keep raising prices without respect to the market, but you have more control than you think. By using a combination of thoughtful data analysis and a healthy dose of fi nancial educa- tion, you can fi nd yourself breaking margin records just like these companies. Simply stated, gross margin enhancement is the fastest way to improving net profi t. And that, my friends, is what we are in business to do. Good luck and know that I am always here to help you along the way. About the Author Jason Bader is the managing partner of The Distribution Team, a fi rm that specializes in helping distributors become more profi table through strategic planning and operat- ing effi ciencies. The fi rst 20 years of his career were spent working as a distribution executive. Today, he is a regular speaker at industry events and spends much of his time coaching individual distribution companies. For more information, call 503-282-2333 or contact him by email at Jason@Distributionteam.com. Also visit The Distribution Team's website at www.thedistributionteam.com. Gross Margin continued Who's Your Data Guru? Now that we recognize the impact of a renewed focus on margin management, it's time to prioritize our activities. The most successful companies understand that data analysis is the key to profi t improvement. Fortunately, modern distribution software packages are rivers of information. You just need to know how to dip your net. I recommend that you designate an indi- vidual to be this data guru. More and more companies have moved people away from the clerical function of purchasing and created more analytical job functions. This data analyst can help you discover holes in sales penetration, inventory trends and most important- ly gross margin opportunities. This requires a desire to get dirty with the data. Your ideal candidate must be one with the spreadsheet. They have to love the hunt and be able to communicate their fi ndings in a way that provokes action, which may be the most diffi cult aspect of the job. I have met some brilliant analysts over the years that have struggled with sharing their fi ndings. They expect others to see what they see in the reporting. While it may make perfect sense to the data- driven, sometimes others have a diffi cult time arriving at the same conclusions. You may have to coach this person on how to share their conclusions in a way that encourages others to take action.