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Take 10

Ten things to think about now to prepare for 2012

by Joan Adams

Here we are, deep in the fourth quarter, quietly waiting for year's end, hoping next year will be better. Well, time to get our collective heads out of the sand, stop hoping and start doing. Here are some thoughts on what companies should be doing right now to ensure that 2012 is a better year.

1) Outsource – No one does everything well. Far too many companies get into serious trouble because they try to be all to everyone by doing everything. You are in the industrial supply business. When there's non-industrial supply work to be done, outsource. I mean, outsource your payroll, your printing, your accounting, your Web design, etc. This may seem expensive, but performing these tasks badly – or incorrectly or not doing them at all – is much more costly in the end.

2) Understand what you do well – To paraphrase Tom Peters, stick to industrial supply. You have outsourced all that stuff you don't know how to do and have no business trying to do, now you can focus on what you do well, where you make your money. Once a year (now would be a good time) perform a little revenue/profits analysis on your company. Where do your revenues come from? Where do you make the most profit? Knowing this will give you great clarity as to where to expand your sales efforts and where to cut back.

3) Change – It is not that change is inherently good, but that not changing is fatal. The business world and your own little industrial supply channel are littered with companies that got off to brilliant starts and then couldn't (wouldn't) adapt to the new customer and market needs. Compare a list of top customers from 10 years ago to your current top customer list. I bet it has changed. Different customers in different industries probably have remarkably different needs in terms of products and service. In short, your customers have changed. Have you?

4) Technology – If you haven't already, get on the technology bandwagon, now. You can't track inventory, deliveries, A/P or anything else on paper any more. It's too labor intensive, far too susceptible to error and too darn slow. Go digital now, before your customers drag you there kicking and screaming. There are many systems out there suitable for the industrial supply business. Properly armed with a good computer system, you can track and measure most everything: sales rep productivity, inventory turns, customer buying patterns, margins, revenues, etc. And it's most likely your competition is already doing this.

5) New Blood – Family and friends are a great resource but Uncle Joe may not be the right person to run the warehouse and Cousin Jane may not be the best person for accounting. Small businesses often rely heavily on family and friends when starting up, some of whom are instrumental in growing the business, but others are not ready for prime time. You need to employ people based on competence. When looking for new employees, go outside the industry from time to time. The industrial supply world, like many others, can get particularly introspective, if not downright myopic about the business. Always remember the reason you started the business; employing the entire family tree was not one of them.

6) Goals for 2012 – Develop a plan and set goals. In order to be motivated, your people need to know what they are striving for. It's the CEO/owner's role to set clear and achievable goals that support the company's vision. Company goals should be simple:

A. Get 10 new customers in region X, region Y, region Z
B. Improve on-time deliveries to 90%
C. Increase revenues from inventory management services by 15%
D. And so on

Start the year with a handful (three to four) of realistic goals. Armed with goals, your people can and will deliver.

7) Margins – Not understanding margins will kill you faster than any economic downturn. You know the old bad joke about the guy selling below cost, but he is sure that he is making it up on volume. You would be surprised how many supply houses do just that. They buy valves for $50/piece, they sell them for $55/piece, comfortable in thinking they are making a tidy 10% profit per valve. Yet the overhead, handling, inventory cost and all the rest runs about $7/valve. So, for each and every valve they sell, they are out $2. Revenues are up, but they are in deep trouble.

8) Cash is king – It is all about cash flow. You can have great vendor partnerships, a long list of delighted customers, fat margins and customer service that is the envy of the entire industrial supply world, but that doesn't count for much if you can't make payroll or pay the bills on time. This happens to the best of companies. It's the nature of the beast. There's a lot of cash outlay before the first dollar of revenue is made. You rent the warehouse, lease the trucks and buy the inventory before the first sale. Even after delivery, you still have to wait 30, 60 or more days to get the cash. Never, ever take your eye off the cash flow.

9) Training – Investing in your employees will pay for itself handsomely. Why buy a new system or upgrade your existing system if your people can't use it properly? Are the salespeople as knowledgeable as they should be about your product lines? Do the warehouse workers know what's in stock and where items are located? Are orders filled quickly and correctly all the time? Training makes your team more productive and reduces a myriad of errors (and errors cost money and tend to annoy
customers). Start looking into training, now.

10) Better data, better decisions – Accurate data will help you manage your cash flow and costs and enable you to price your goods and services with profitable margins. You will be much wiser about your customers and your suppliers. With data, you can manage by the numbers, which is the only way to manage.Good luck with the top 10 as you prepare for 2012.

Joan AdamsJoan S. Adams has consulted for industrial clients for more than 20 years. She operates Pierian, a consultancy that brings sustained and measurable success through operational excellence, customer focus and competitive market strategy. She has engineering degrees from the UW-Madison and MIT. E-mail her at

This article originally appeared in the Nov./Dec. 2011 issue of Industrial Supply magazine. Copyright 2011, Direct Business Media.


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