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March/April 2017 35 www.encoreplumbing.com/powerpulse 800-526-3694 • sales@encoreplumbing.com Now you can clean all of this using LESS WATER and 43% FASTER * . Introducing PowerPulse ™ Pre-Rinse Spray Valve. Unique pulsing action creates a high pressure stream that powers off dried and baked on food in less time with less water. • Easy retrofit to most existing pre-rinses – or available as a complete unit • Available in .67gpm, .74gpm, and 1.05gpm 1890 Swarthmore Avenue, PO Box 2020, Lakewood, NJ 08701 www.encoreplumbing.com C US NSF - 61/9 - U.P. Code ASME A112.18.1/CSA B125.1 Easy retrofit to most existing pre-rinses – or available as a complete unit Available in .67gpm, .74gpm, and 1.05gpm *Results provided by Fisher Nickel, Inc. Food Service Technology Center. © Copyright 2017, Component Hardware Group, Inc. opportunity to improve the gross mar- gin percentage. It involves identifying items that can withstand price increases without impacting the fi rm's competi- tive position. Such items, almost all of which are slow-selling SKUs, represent a small pro- portion of sales volume. At the same time, they have the potential to contrib- ute to a signifi cant improvement in the fi rm's overall gross margin percentage. Every pricing study that has been con- ducted has found a potential gross mar- gin improvement that is at least three times as large as the improvement in Exhibit 1. Expenses—The overwhelming major- ity of distribution managers are tired of hearing about expense control. The economic disaster of the so-called "Great Recession," followed by eight years of tepid growth, has left most of them feel- ing that there is nothing left to cut. They may well be right. The real key to expense control is not to cut expenses or even to become more productive. What is needed is an empha- sis on internal order economics, a topic covered in previous articles. In simplest terms, the battle is to get the maximum number of items on every order. If that can be done, expenses will systemati- cally fall as a percent of sales, even as they continue to increase in dollars. Operational Consensus As distribution businesses have increased in size and scope, they have become more bureaucratic in nature. In far too many instances, they have moved beyond bureaucratic to the point of being bal- kanized. Recent research conducted by the Distribution Performance Project in a number of lines of trade has found an amazing lack of consensus among key managers as to what is really impor- tant in improving performance. It is not uncommon for half of the fi rm's key managers to feel that prices should be reduced to gain sales volume, while another half feels that prices should be increased. Interestingly, it is not just the "sales guys" that argue for lowering prices. The uncertainty about what to do affl icts every aspect of the operation. With such disparity of understanding, there is little chance of making meaningful improve- ments. The key to achieving goal congru- ence is management education. There is often a feeling that "they all know that" regarding issues such as the impact of inventory reductions. The real- ity, in fact, is that half of them don't know that. Education must be geared toward providing a basic understand- ing of what really drives profi t in the fi rm. There should be no intent to make everybody an accountant. However, it should be relatively easy to ensure that all managers understand the economics of price cutting, for example. Moving Forward There is no denying that distribution continued on page 44