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Breaking Down the Profit Barriers in Distribution: by Al Bates

Dr. Albert Bates, President — Profit Planning Group

• competitive strategy • distribution management best practices • expert interview • management strategies • industry perspective • Wholesale Distribution Industry • distribution industry trends • business math for distribution

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I recently sat down with Al Bates of the Profit Planning Group for a video interview where we discussed his new book, Breaking Down the Profit Barriers for Distribution. Al's book is great, and I've really enjoyed reading it over the past few weeks. Although it's a numbers book, there's a lot of humor in there, especially where the book discusses some of the well-intentioned analytics that have been invented over the years ,which don't actually function very well.

"One of my all-time favorites," Al began, "is GRMOI. I've gone into companies which have told me that that they got their GRMOI up to 200. My first response is, 'How has it affected your profitability?' and, more often than not, I would be told that their profitability had actually gone down. Companies have been using a lot of metrics which may have become antiquated or just never worked in the first place. This is why part of my book involves taking a step back and talking about what we really ought to be doing."

Too many of these metrics are like that. I consider myself a numbers guy; I wrote one of the earliest accounting systems for computers, so I have a good understanding of accounting. I can personally attest to the fact that many of the metrics that come from the accounting department aren't necessarily usable, let alone valuable. The systems currently in place usually also don't focus on the cost structure which is really the key factor.

"One of the things I try to explain in the book is that there are a broader set of metrics," Al said. "Just because you've been using this metric all your life doesn't mean that it's what you ought to be doing in the future. It also discusses the implications of mistakes. When it comes to metrics, there's no such thing as a little mistake because everything can have a huge profit implication."

What struck me about the book is that it's very readable, unlike a lot of other books on the subject, so it's understandable even if you don't have a numbers or accounting background. There are short explanations on not only what these things are but how they work and what the risk factors are in using them. The thing I liked most is how it doesn't just tell you how to get something done, but it also warns you about the potential impacts if you get something wrong. This information is immensely valuable.

"I'd like every CEO to have it," Al explains. "However, it should go down further than that. One of the things that I find when I talk to companies is that every employee has a different view of what they're supposed to be doing. My book is really designed to get everybody on the same page, so I would say that everybody on a managerial level should read it."

I agree with that idea since if managers are able to see the bigger picture then they're able to instinctively contribute to what needs to be done, which makes them more valuable to the company. However, if you're a company president, or hope to someday be a company president, then this is an absolute must-read. The majority of the CEOs or presidents from the top companies in the world came out of sales organizations. You simply cannot make it from sales to the CEO suite without knowing this stuff, because the company will fail. Getting that insight early will give you a real advantage.

I love the style of the book, I love the humor of the book, and I love the ideas in the book most of all. Breaking Down the Profit Barriers for Distribution is a terrific read that can give managers some valuable insights, and I can't recommend it enough.

For more information about Dr. Albert Bates, visit: www.profitplanninggroup.com

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