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BUSINESS INSIGHTS: Using Category Management to Overcome Inefficiency

Supplier marketing programming can also create inefficiency. Winter buys and stocking programs can drive positive economic impact for dealers, distributors and suppliers. However, in some cases, ill-conceived or poorly constructed programs can place undue burden on dealers and/or distributors. In most instances, the value of the early buy program is driven by the strength (or weakness) of the supplier’s balance sheet. Dealers need to seek terms that best fit their own business model and cash flow needs. Stocking programs have an understandable benefit, but inflexibility on the part of the supplier or distributor can make them costly and ineffective for the dealer. Suppliers, distributors and dealers should work together to ensure all are benefiting from seasonal and stocking programs.

Product packaging is at times inadequate. As a result, products are often damaged in transit or wear poorly in typical yard conditions. Also, many product lines can be very SKU intensive. For example, composite railing from an individual supplier can have more than 1000 SKUs when factoring in styles, configurations and colors. Product categories and product lines tend to follow the Pareto principle: 80% or more of revenue is derived from 20% or less of the SKUs. As a result, a number of slow moving SKUs must be carried in order to have the opportunity to sell a full product line. Can they be packaged/bundled in a way that reduces the inventory carrying cost for a dealer? Can product packaging itself better protect product as it moves through the system to the yard, thereby reducing damage cost and shrinkage rates?

Efficiency Opportunities Exist for Dealers and Distributors

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Distributors and dealers can also contribute to inefficiency and increased system costs. Some of the increased costs are real and some are reflected as opportunity cost.

Displays and sales literature can be valuable tools in the effort to educate consumers/contractors on product performance and benefits. Conversely, poorly constructed or poorly maintained displays can serve as powerful agents against sales. Literature that goes unused in a given timeframe is often dated and should be tossed. These are but two examples of a huge cost borne by all supply chain participants.

The purchase cycle (the time from initial interest to purchase) can range from weeks to even months. Are dealers preparing salespeople to be successful in driving growth over the short and long haul? Do dealer merchandising and promotional vehicles serve to educate the contractor/consumer in a way that translates into more sales?

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