A blog post on the Salesopedia website explains that some organizations often confuse a sales forecast with a sales pipeline. But it’s important to remember that there are distinct differences between the two terms, and they shouldn’t be used interchangeably.

Here’s how I would describe the difference to a distribution salesperson. The sales forecast is an account-by-account projection of the sales and margin dollars expected for a given period of time. On the other hand, the pipeline is really a list of projects that the sales rep is working on with customers. There may be customers that have multiple projects going on, but the projects might be independent of one another.

As the post explains, the pipeline offers a comprehensive view of a salesperson’s opportunities. The operative word is “opportunities.” The pipeline must show everything from new leads to transactions that are ready to close.

The post says that some salespeople are hesitant about putting unqualified leads in the “top end of their pipeline” because they don’t want to focus on sales that are still up in the air. They would rather focus on the business that is nearly closed. But doing things that way is a mistake, as it does not paint the whole picture.

So remember, having a diverse sales pipeline is a good way to keep track of all of your projects. And as the Salesopedia blog post suggests, it is important to indicate which stage of the sales process each of the projects is currently in. Then you can extrapolate from that the likelihood of closing some of those projects.

I’m a big advocate of sales pipelines for salespeople, whether they’re inside or outside salespeople. I think the idea of indicating what stage of the process they’re in is an excellent one that would really help many salespeople in wholesale distribution.

Source: Salesopedia, April 21, 2013

An article on the Supply Chain Digest website references a recent study from Chicago Consulting that lists the top locations for distribution centers based on distance and lead time to customers. For example, if a company could only run one distribution center, the best place to locate it would be Vincennes, Ind. That spot puts the company an average of 819 miles and 2.31 days away from the average customer in the United States.

As I see it, with this list we’re talking about consumer products that are essentially used based on population size. So, as the article shows, we can use a computer algorithm to calculate the average lead time, via common carrier truck, to get products to that population from a certain place. We can figure out how long it’s going to take to get there, and we can figure out how many miles the typical customer is away from the distribution center. If we add more distribution centers, we can see how much closer the customer is and how much faster we can get the product to them.

The gradient as you go from one warehouse to 10 is very gentle, for the most part. But going from one warehouse to two warehouses makes a big difference. With one warehouse, you’re 800 miles away from your typical customer, while with two warehouses you’re 500 miles away on average. With one warehouse, you’re 2.3 days away from your typical customer, and with two warehouses, you’re 1.5 days away. So you do see some pretty big jumps. However, as you go from two warehouses to three warehouses and so on, there’s a much smaller change in average distance and lead time.

While this information certainly is interesting and informative in driving supply chain management decisions, it’s neither company nor product specific. Plus, any distributor would also have to also take into account the cost of space in these different locations to truly map out the best and most cost-effective distribution networks.

Source: Supply Chain Digest, April 17, 2013

A blog post on the Industrial Distribution website explains how the technology is becoming more prevalent on the warehouse floor as it helps keep workers’ hands free while on the warehouse floor. Some of the gadgets based on this technology are particularly advanced, such as head-mounted computers that come equipped with voice control features and large virtual screens. Although they’re not as advanced as head-mounted computers, ring scanners are another example.

As I see it, bringing this type of technology into play has a lot to do with improving safety. Think of it this way: How much safer would warehouse workers be if they could keep their eyes on their work and where they’re going without having to look down to read information on a screen? Just like you don’t want someone driving a car on the freeway and trying to text at the same time, you don’t want your forklift operators reading and entering data while they’re moving. The safety factor there is significant.

However, there are enough wholesale distributors now that desperately need a warehouse management system, or at least to just get into bar coding. In other words, they need modern warehouse distribution software, so they’re a long way away from implementing wearable technology. In the fulfillment centers, this technology is probably in use. However, at your more typical wholesale distributor operation, you’re not likely to find wearable technology.

With an eye toward the future, it’s good to think that with wearable technology forklift drivers could hear their instructions rather than have to read them, as the Industrial Distribution blog post suggests. And they could communicate with their boss or with the computer using voice-directed technology. It sounds good in terms of thinking ahead, but I don’t see this type of technology being on your typical wholesale distributor’s capital expenditures list any time soon.

Source: Industrial Distribution, April 19, 2013

Attempting to predict market volatility is like a gambling contract — to sell a hedge, there has to be someone on the other side of the table who feels the opposite of you. It’s risky and impractical for the average distributor. Distributors are in the business of meeting customer needs, not speculating on product inventory. Most distributors do not have the expertise to hedge. The goal should not be trying to turn a profit when the market is erratic. Can you imagine trying to outguess Hershey’s to find the best cocoa prices?

Distributors can track commodity prices, but they shouldn’t expect to secure the prices they got last year or even last week. A historic price is irrelevant because that’s not the market price. Selfish suppliers don’t want to sell strategic information about their customers. So being in the know about future prices comes at a price. It means you’re likely getting information from an expensive newsletter that costs thousands a year in subscription fees.

Sure, distributors can buy future inventory at a low price and sit on it for months. But you need a lot of space for that. Inventory carrying costs are pretty high. You’re taking up warehouse space and tying up capital by buying a commodity in bulk to maybe save a few dollars.

Don’t make hedging an art form. Instead, adapt your supply chain to flex with the market.

Distributors want to avoid building up inventory when price points are high. You’re lucky if you bought product when yesterday’s prices were lower. But you don’t always get so lucky. Most distributors have to price their product based on replacement costs, which is essentially what they’re going to pay for their next shipment.

Adapting to the market’s changing supply and demand takes business savvy from supply chain management leaders. Wholesale distributors should get a manufacturer to sign a pricing agreement, even if it’s a sacrifice to the margin. This is especially crucial if your distribution model relies on commodities that are dependent on material cost rather than heavy on labor cost.

As a distributor, you want to cover yourself. If you can secure a fixed price guarantee for a year, you may be taking a big risk locking yourself into a price. But such a pass-through agreement guarantees you will receive raw material at the same price for the length of the contract, protecting yourself in case prices increase.

Most ERP systems have capabilities and pricing modules to support these agreements. Distribution software can help you manage the change, which is a key part of business evolution.

Keep your operation model flexible — and don’t get in the business of hedging.

The point of the post is that good salespeople may leave your company if your territories are not aligned properly. This post presupposes, I believe, that the reps are on a salary-plus-bonus and a quota system. However, most of the time in the wholesale distribution the sales force is not on a quota system. It may have a goal, but its compensation is not so much based on achieving the goal as it is on how many gross margin dollars the sales force generates.

Clearly, salespeople who are really good — those who make a lot of money and want to make more — are very interested in their territory. But in most wholesale distribution businesses, the territory is not geographically limited.

Wholesale distribution salespeople tend to specialize in certain types of customers, no matter where they are. They will even follow a customer who relocates. Most wholesale distribution sales reps who are on commission have worked hard to build up their territory. In sales management, moving an account away from a sales rep is generally not done, unless the account is too small for that rep to work on anymore.

With those factors in mind, the Sales Benchmark Index blog post offers the following five sales management suggestions to help develop territories for your top sales talent.

1) Analyze the customer base and market potential.

2) Use rankings to measure members of the sales force. Ranking the talent has a lot to do with whether a person should be working for a company. On the other hand, if the person has the talent but doesn’t have enough experience yet, then the question becomes how to jump-start the person’s experience.

3) Find out where customers and potential customers are located.

4) Cultivate new territories.

5) Review a map of the territory.

While the first two suggestions are pertinent, I don’t think the final three suggestions necessarily apply to sales management in wholesale distribution companies. That’s because, again, territories in wholesale distribution aren’t generally based on geography. Nonetheless, this article provides a good overview of how to improve sales management strategies.

An article on the Industrial Distribution website, part two in a two-part series, addresses some common mistakes that occur during succession planning and offers some solutions to minimize those problems.

The concept of succession planning is that the older generation can pass along ownership while still maintaining control of the company. I call this the fruit and the tree. You can give away the fruit, but you can keep the tree, at least for a while. In other words, the older generation keeps control of the business, but it passes along the future growth and the value of the business to the next generation.

Unfortunately, the older generation sometimes feels like the younger generation is never ready. The Industrial Distribution article mentions that there often are people outside the company who are very important stakeholders. For a distributor, the suppliers are critical stakeholders, and so is the bank in addition to perhaps some large customers.

Those stakeholders often are very concerned when the business ownership and management passes on to the next generation. In fact, the bank may not want to lend money or do business with the next generation. It may actually consider the death of the owner and the passing of the business on to the next generation as being a change-in-control event that would enable it to cancel the loan. Potentially, the business could fall into the hands of a spouse who doesn’t know much about the business.

That’s why when considering succession planning you need professional advice from an attorney and an accountant. It’s also a good idea to have the board of directors there to see that a smooth transition takes place. However, many people fail to plan. Maybe they feel that they’re immortal or somehow they feel they’re a genius, but either way, they’re making a mistake.

Of course, it’s true that everybody in the next generation isn’t capable of leading the company. If that’s the case, I think the owner would be a lot better off selling the company while they have their wits about them, rather than holding on to the business and have an orderly situation turn to chaos as the company loses its value.

Source: Industrial Distribution, April 4, 2013