Tim Feeheley has a bad feeling.

Everything seems to be going well for the president of JanPak, a multi-regional jan/san distributor that serves 12 states in the southern part of the country. He hasn’t heard any complaints from customers. Profits are up. Inventory management is running along smoothly.

Nevertheless, he’s uneasy. He can’t place his finger on it, but he has a premonition that one of JanPak’s largest, and most important, customers is overdue for an order. Six months ago, he would have gotten on the phone and called sales managers at multiple locations, anxiously trying to track down the phantom account, if one even existed.

Instead, he simply taps at the keyboard of his office computer and instantly pulls up monthly sales reports for JanPak’s top 50 customers. One account, a large university in Florida, is highlighted, signaling a possible missed sale. He clicks on the account and finds that the university usually places a large annual order for all of its washroom paper supplies during the last week of June. At least that’s the trend, but the university hasn’t made the order for 2003, and it’s already July.

Feeheley calls the sales manager, who discovers that the university was considering going with another distributor — one that offers midnight deliveries. JanPak is able to match the competitor’s offer and keep the account.

“Without the ability to quickly access and analyze our sales data, we would have lost the account,” says Feeheley. “By the time we realized that the customer hadn’t made a purchase, it probably would’ve been too late.”

The software program that JanPak uses to continually monitor its top 50 accounts is part of an overall demand planning and sales forecasting (DP&SF) system. In addition to Feeheley, other executives and sales managers in the company can access data, and it can be organized in any number of formats in addition to the top 50 accounts.

“We can see what our top product lines are for this month, and we can predict fairly accurately what our top product lines will be for next month as well,” says Feeheley. Data can also be organized by manufacturer, by sales rep, by region, by end user or by growth potential.

Sell On Demand
DP&SF is a powerful tool that is being utilized by distributors in other industries, but has been slow to take off within the sanitary supply industry. Sure, JanPak and a few other leading distributors are making use of the sales data they accumulate each year, but it’s mostly manufacturers and wholesalers who are currently tapping into the sales opportunities that data mining creates.

Customer-specific data and product sales data are two of the most important categories in DP&SF. When past sales are scrutinized, a distributor may find that one of his key customers always purchases washroom supplies in October. If October comes and goes without the customer placing an order, the distributor most likely has reason to be concerned. Likewise, the sales data may show that 75 percent of floor machine sales occur in the spring, or that 60 percent of new accounts are opened by selling washroom cleaning chemicals.

“If a distributor has good customer information, that’s where they need to start,” says Rick Johnson, a distribution consultant with Indian River Consulting Group in Ft. Lauderdale, Fla. “Forecasting can be very difficult or very easy depending on how detailed you want your predictions to be, but everything starts with historical data.”

Johnson says that most distributors already have the technology to pinpoint sales trends, they just aren’t aware of how to use it. While DP&SF software can save much time and energy, all that’s really necessary for accurate data analysis is the sales data itself.

“Any good distributor should have a system where they can access all their sales data and then segregate it by territory and accounts,” he says. “You should be able to take a look at all your lost business and why the account was lost, in addition to all your new accounts and business growth.”

Distributors can develop several applications of the DP&SF system fairly easily. When a salesperson loses a sales account, a code can be entered into the sales data that identifies the reason for the loss. For example, 14 might be the code number for customers who decided to go with a competitor who offered a lower price, and 15 might be the code for customers who were lost to a competitor with better delivery options.

Data can be broken out to analyze the performance of individual salespeople or to profile existing customers. “If you have a mature sales force, you can look historically and see how many new customers they’re going to bring in,” says Steve Epner, president of BSW Consulting in St. Louis. “You can see that your average customer starts off buying only a few products, but then ramps up around the nine-month mark and starts to purchase a lot more.”

Feedback Friendly
Demand planning and sales forecasting are invaluable for distributors who are looking at improving sales, but operational efficiencies are another advantage. Inventory that has been sitting in a warehouse for too long is easy to miss unless storage data is being scrutinized regularly. Shipping and receiving procedures can benefit from demand planning as well. Even purchasing — if distributors are brave enough to share their forecasts with manufacturers — is awash with possible savings. If suppliers know the peak time of demand for a distributor, they will likely do what they can to help that distributor meet customer needs.

In the steel and electronics industries, for example, manufacturers commonly ask for distributor feedback with regard to product success. JanPak and other leading jan/san distributors are plotting a similar course for the sanitary supply industry. “Manufacturers want to know exactly what customers are buying their products, because it helps them decide who they should be marketing to with future product lines,” says Feeheley.

“With two or three different manufacturers, we’re looking at giving them a report on a quarterly basis,” says Feeheley. “We can pick a manufacturer and then electronically send them detailed information on their customers. We can tell them what products they’re buying, when they’re buying, and we can separate it by channels: building service contractors (BSCs), in-house cleaning professionals, schools, etc.”

DP&SF is commonly done on a quarterly basis, but some distributors choose to produce monthly or even weekly reports. Many software vendors offer DP&SF software packages that allow executives to “look in” at the data that is being compiled in real time, along with instant trend analysis and sales projections for the coming week, month or year.

“It allows us to look at several categories and produce graphs for analysis immediately,” says Feeheley. “We can look at data that’s organized by product category, manufacturer, individual salesperson, customer market and a myriad of other ways.”

There are so many possible ways to analyze the sales data, JanPak has to limit the options available to sales managers so that they don’t get bogged down with too much information. “It’s easy to get lost in the weeds,” says Feeheley. “We have such a robust system that there are almost too many ways to look at the data. We’ve limited it to 10 reports because we don’t want our general managers and sales managers to spend all their time downloading data.”

The advantage of using a software package that provides DP&SF reports through a centralized location is that every department is not developing separate — and possibly conflicting — reports. Distributors should have one master sales forecast that drives the actions of the company, which all other departments — shipping, research, sales, warehousing — follow, says Edward J. Marien, professor of executive education at the University of Wisconsin-Madison and one of the first academics to research the history and impact of DP&SF.

“Within the company, you have to make sure that you have consensus planning,” he says. “The supply chain people, the salespeople and the operations people can’t all have different forecasts flying around. That just results in miscommunication and confusion.”

The Problem with Optimism
Sales forecasting reports of one kind or another have been around as long as commerce has existed, but they weren’t nearly as accurate as those of today. “There are a lot of people who grew up in the old world of distribution, so they’re cynical about forecasting and demand planning,” says Epner. “The way it used to be done was all the salesmen would just guess that things would get better and they’d put it in an annual report. It was called the annual lie and it was very seldom right.”

Even today, many distributors look at sales forecasting as more of a guessing game than a powerful tool. “Just recently we’ve started to get a chance to do some product research and some customer research,” says Richard Weinfeld, president of Edison Chemical Co., a jan/san distributor in Boston. “We’re getting our feet wet with some of the newer software that’s available, but I’m still dubious about what a software package can actually accomplish in terms of doing practical research that will increase sales.”

In any industry, salespeople can be tempted to be overly optimistic in their department forecasts. “Demand forecasting is an art alchemized into a science,” writes Scott Berinato in a recent issue of CIO magazine. “Reports from sales reps and inventory managers, based on anything from the partners’ data to conversations in an airport bar, are gathered along with actual sales data and historical trends and put into systems that use complex statistical algorithms to generate numbers. But there’s no way for all the supply chain software to know what’s in the sales rep’s heart when he predicts a certain number of sales.”

As much as a distributor may want to see a product line succeed or a new account opened, the numbers must be analyzed objectively and without bias.

Virtual Sales Don’t Count
Even with accurate and uniform DP&SF reports, selling is still a competitive — and therefore unpredictable — business. “Even if we do find that Customer X is increasing his usage of particular products at certain times of the year, we still have to go out and offer a price that he finds appealing,” adds Weinfeld.

One customer that Edison Chemical covets is the Boston Public School District. The jan/san distributor dedicates a lot of energy and time in knowing when and how that customer likes to buy, but such a large customer has the power to just turn a business partnership into a bidding war. When that’s the case, research becomes moot.

“The Boston public schools usually have us bid on a long list of items,” says Weinfeld. “Some years we win the floor wax account, some years we win mop heads and some years we get both. Other years we lose out to our competitors who can sell at a lower price. For an account like that, research isn’t going to do very much.”

Many of the distributors interviewed for this article shared Weinfeld’s sentiments; although sales forecasting offers the possibility of a great return on investment, the sluggish economy makes sales forecasting more arduous.

“Normally, you can depend on forecasts, but today, with the economy the way it is — the manufacturing sector is down, foodservice is down, the restaurant business is struggling, it’s more difficult to do any accurate forecasting,” says Ron Grahf, sales manager for Bear Distribution, Rockford, Ill. However, economic challenges are not a reason to abandon sales forecasting all together, he adds.

“I can’t see how any sanitary supply distributor can go without a some kind of demand planning,” says Grahf. “You have to be able to forecast items sold, but most distributors can’t afford to put hundreds of thousands of dollars into the software either.”

The price of DP&SF software is coming down (an effective off-the-shelf version can be purchased for less than $1,000), says Epner.

A poor economy only serves to increase the necessity of sales forecasting, according to Marien. “Although there is a lot of price pressure on distributors right now, it still behooves them to analyze the data and decide if this is the best deal,” he says.

“If I’ve done a good forecast, and the economy goes sour in the middle of the year, I can adjust that rather easily,” he says. “If it’s been done accurately, and then suddenly there’s a 15 percent fall-off in June, then everyone gets together and adjusts the plan accordingly.”

Take Opportunity Captive
For Bear Distribution, Grahf has been able to organize key product data in order to maximize sales opportunities without an expensive, high-end data mining software package. “We can look back at the data we’ve gathered and see that we should focus on selling trash cans in August, for example, because a lot of buildings are purchasing that kind of item during that time,” he explains.

Dedicating sales resources toward DP&SF won’t necessarily make selling an effortless endeavor; salespeople still have to go out and build relationships with customers. However, it will serve to cut down on wasted sales calls, and it can reveal the optimal time period for making a sales call. “No amount of sales forecasting is actually going to increase your sales without you doing any work,” says Epner. “But accurate data opens up a floodgate of opportunity for those distributors who take the time to analyze it. Fortunately, many software packages allow executives to do that quicker than ever before.”

Data mining is the foundation for accurate sales forecasting. That data, when available to distributors in an organized format, can favorably impact nearly every area of a distributor’s business. “It’s not limited to selling ice melt and so-called seasonal items,” says Grahf. “Soap dispensers, mops and trash liners all have times of the year that they’re in peak demand. We can forecast that we should focus on selling mops in March, for example.”

The reason for the increase in March mop sales may seem obvious later on: as winter snow melts, springtime brings more slush, mud and dirty floors. But without the sales data that revealed the trend, many sales managers never notice the peak sales periods for each product line.

In the end, however, advanced technology is simply a means to an end. Organized sales data is a treasure that will benefit any sanitary supply distributor who realizes its worth. DP&SF software packages and programs are simply the fastest way to get there.

“Forecasts drive demand planning,” says Marien. “The more accurate your forecasts, the better your planning — it is that simple.”




POSTED ON: 7/1/2003