Issue link: https://www.e-digitaleditions.com/i/799779
30 FEDA News & Views O ver the course of the last few years, the emphasis in distribution has moved away from improving operations to completely re-thinking the nature of the business. New ideas have included dramatically reducing the num- ber of customers served, using "big data" to gain a marketing advantage, struc- turing separate web-based entities and using mobile technology to preempt competitors. Countless other strategic initiatives could also be listed. Somewhat lost in the discussion is Money Matters "Little Things Mean a Lot" The Impact of Systematic Operational Changes & Other Blocking and Tackling Tactics By Dr. Albert D. Bates Director of Research, Profi t Planning Group the idea of managing the existing busi- ness for greater profi t. It is not that distributors have no desire to improve profi tability. It is just that the idea of improved performance from blocking and tackling better seems so 20th cen- tury. This report will examine the eco- nomic realities of improved operations from two distinct perspectives: the eco- nomic impact of small improvements, that is an analysis of how even modest operational changes can lead to much higher profi t levels; and guidelines for operational improvements, or a discus- sion of the opportunities for blocking and tackling better. The Economic Impact of Small Improvements Exhibit 1 examines the income state- ment performance of a typical FEDA member based upon the latest PROFIT Report. As indicated in the "Current Exhibit 1 The Impact of One-Percent Improvements For a Typical FEDA Member Current Potential Percent Income Statement ($) Results Results Change Net Sales 20,000,000 20,200,000 1.0 Cost of Goods Sold 15,200,000 15,303,520 0.7 Gross Margin 4,800,000 4,896,480 2.0 Payroll Expenses 2,900,000 2,871,000 -1.0 All Other Expenses 1,500,000 1,485,000 -1.0 Total Expenses 4,400,000 4,356,000 -1.0 Profi t Before Taxes 400,000 540,480 35.1 Income Statement (%) Net Sales 100.0 100.0 Cost of Goods Sold 76.0 75.8 Gross Margin 24.0 24.2 Payroll Expenses 14.5 14.2 All Other Expenses 7.5 7.4 Total Expenses 22.0 21.6 Profi t Before Taxes 2.0 2.7 continued on page 34