Putting Your Customers' Needs First

Business Basics in a Customer-focused Company Most all companies evolved by providing a product or service to a group of customers with the expectation of making a profit. Many companies have become quite successful with over one hundred years of experience, many have gone out-of-business, and still other new companies are continually being formed to product new and existing products and services to the next generation of consumers and customers. Existing companies are continually growing, shrinking and changing. Much of the information presented in this section should serve as a road map for aiding those employees tasked with streamlining and growing your company’s business so you can better serve your customers’ needs today as well as in the foreseeable future. Performing a Stock Keeping Unit (SKU) Item Analysis is an ideal way to prioritize your business efforts and, at the same time, optimize your service to your customers. Everyone is searching for ways to be more effective in today’s tight economy…the common question is how can I do more with less? One way is to optimize your efforts and reduce costs by focusing on those products that account for most of your sales. This analysis approach works equally well for manufacturers and/or our distributor partners who need to determine how best to spend their time. You can accomplish this analysis by simply ranking your prior year sales by SKU in descending order by dollars…it is best to group your SKU’s in logical sales groups that are relevant to your business goals. The table on the next page is an actual example of a real product/item ranking (the product line names have been made generic for privacy purposes). While this company had several hundred thousand items in their master item database and they carried over 15,000 items in stock…their annual sales for the prior year included sales for ONLY sold 26,601 different SKU’s! More importantly, less than 300 part numbers (272) accounted for 25% of sales; only about 1,000 part numbers (1,004) accounted for 50% of sales; less than 3,000 part numbers (2,966) accounted for 75% of sales and less than 6,500 part numbers (6,488) accounted for 90% of their total sales for the prior year. Now…where would you put your priorities? Likewise, for the Primary Product Lines Only, 158 items covered 25% of their sales volume; 583 items covered 50% of their sales volume; 1,705 items covered 75% of their sales volume; 3,769 items covered 90% of their sales volume and 16,830 items covered 100% of their sales volume. Upon further analysis, it was determined that stock items accounted for over 90% of the sales dollars but represented only 45% of the item count; made-to-order (MTO) items accounted for less than 10% of the dollars but represented 55% of the item count! • SKU Item Analysis