Making Sense of the Numbers

When it comes to running a business, having the right information in hand can make the difference between a sale and a disappointed customer, a win or a loss, success or failure.

For many jobbers, it has become a habit to focus on the sales and revenue side of the business. While emphasis on the front end is well placed, in today’s business environment, it is wise to balance your interests in a number of business areas.

“What we found in the last year or so that really give the biggest opportunities were in pricing and in getting the installer connected to them,” says Jerry Fugina, president of Rinax Systems Ltd.

“Pricing is a huge issue. The questions that come into our call centre have more to do with pricing than any other single issue.” Not surprisingly, the impetus for this is the overwhelming need to improve the profit picture of so many businesses in the distribution chain.

Margins have been compressed on many high-profile, high-volume lines, so the need to squeeze more profit out of a business is landing at the feet of manufacturers and warehouse distribution networks.

“One of the ways to combat shrinking margins is to come out with special pricing strategies on select parts within a line. That’s new. Even a few years ago, all the part numbers took the same set of pricing rules. Now they are isolating parts within the line and giving them new rules.”

That is, of course, easier said than done, and jobbers with older computer systems can be forgiven if they feel faint at the prospect of manually adjusting pricing for thousands of individual items.

“It is getting to be that there is no such thing as an industry standard price. It is an issue that our industry is facing as a whole. One of the things that could help is to provide automatic price updates for systems, and software tools to allow individual part numbers to accept a special price. Some of the older systems don’t have sub-lining category.

“At the jobber level it is becoming a big job to manage that pricing. It gives them a big opportunity within their market area, but boy, when you think about it, it is getting to be a very big job,” says Fugina. Nonetheless, Fugina stresses that it is an important one to get right. “Jobbers are needing tools to help them deal with that. Depending on how good a job you do, it can either attract business or discourage it.”

And often it is the business owner, or his most highly trusted employee who is charged with the responsibilty. Few things are as sensitive as pricing. (I once saw a clerk literally driven to tears by an angry business owner for pricing a wheel bearing uncompetitively.)

John Pedersen, owner of Toronto & Hamilton (T&H) Auto Electric in Hamilton, Ont., says that there are a number of issues to consider when watching your business. And while newer computer systems can give you an important window on your business, it is important not to overdo it.

“With the new systems, you can get over-reported. You have to be careful,” says Pedersen. There are the standard daily reports–sales, gross margin, margin dollars–but keeping tabs on the back end of the business is proving to be increasingly critical.

“When business gets tough, we are looking more at expenses than sales.” Certainly comparing sales from year to year is important, he says, and he strives to find ways to limit the peaks and valleys. “The business has changed so much. There is no more spring and fall tune-up season. You have to work with the customers. You have to work with their strengths. You have to tailor your service.”

Pedersen understands that to know what a customer’s strengths are, you have to look at the data. “We can look at our customer history. Some of our guys are seeing a lot of imports, others not.” He says that trending data is helpful, and he is able to leverage his ACDelco association to access specialized data from service providers participating in the Total Service Support program. “We can tell where a guy is trending, and which ones we are weak with.” Being able to determine which customers your service providers are catering to, and relating this to the parts they buy from you, is no doubt valuable, but what you do about it is even more critical.

“One of the things today is that you can’t really get more customers, so you have to grow within your customer base.”

“Jobbers need to know these things,” says Bob Worts, sales manager, Carrus Technologies. “They need to be able to look at a group of things all together. But, I think that part of the issue is that there is so much involved that if you’re not careful, you will kill yourself with reports.”

Typically, getting around information overload can require both macro and micro views; broad trends are important to keep track of, while fine details can unleash potential market opportunities. The right reports can help you see customer trends worth addressing.

“We have the ability to give a report of the number of defects so that you can see if the defects are increasing or decreasing,” says William Balestrini, president, Partner Data Systems Inc. “And doing that by customer, you can compare it to the norm. If a customer has a 25% defect rate when everyone else is at 10%, you may have some mechanics with training issues.”

Additionally, what is it costing you to serve some customers? One jobber who had embarked on ISO certification had to determine the cost of each delivery. The exercise uncovered the fact that it was actually costing the jobber money to support one small customer, who was subsequently compelled to increase his commitment to that jobber when faced with losing it as a supplier.

Also, comparison reports can give you a good way to look at some broad trends in your business without becoming bogged down in pages and pages of data.

“Essentially, you can pick items off the inventory report,” says Greg Canning, Mountech Information Systems Ltd. “You can take, for example, balance on hand versus landed costs. Perhaps you wanted to look at a physical count where the on-hand quantity is greater than $10,000.

“Recently, we had a customer who wanted to isolate parts within a price update date range. He used that comparison report to isolate those parts and wanted to recalculate that into a flag too, so that he could isolate them easily into a report.” Canning says that such tools can require creativity, and time to understand. “There are millions of uses for it.”

Millions of bits of data may be just what some jobbers are trying to get away from. Simple indicators have their place.

With this in mind, graphical user interfaces have begun to make their way into management systems available to the aftermarket. Often referred to as a dashboard (a particularly suitable moniker for the automotive industry), the systems can provide the same kind of quick data that a racecar driver is looking for in the middle of a hot lap.

“There are several ways you can do reporting,” says Chris Scurr, director of sales and marketing for AMS Computer Group. “There are standard reports from a jobber system, either on the screen or printed. You can also customize with Crystal Reports. There is a fair number of different ways, so it can make reporting complex.”

In response to these potential complexities, and in keeping with a trend to graphical user interfaces, AMS has developed a dashboard that takes the term quite literally, having the critical data of the business represented on a set of automotive-style gauges that change colours from green to yellow to red, depending on whether the values were within a desirable range or not.

Scurr gives an example: “Under the inventory gauge, it says $695,000, which is the exact number. Next to that is the turns, 6.41 in this case. The dollar value per invoice is $39.78, and the number of invoices to date 9,341.”

Other values, such as gross margin dollars, percentages, and daily averages are also represented. More detailed data can be accessed through the system, too, but it also allows for quick simulations to be conducted.

“Where it is really valuable is that, say they feel they should reduce the number of turns from 6.41 to 5 turns, they can see what that would that do in terms of the value of inventory.”

The system also allows for alarms to indicate when certain thresholds have been exceeded, freeing management from having to continually query each store.

“Clarity and ease of use and simulation of the data in a very understandable form, is where we thought we should focus. Anything that is in the database that they can use to help guide them in their business is important. For example, having a setpoint for sales for the day, say $10,000, and having an alarm attached to notify the management when that has been reached.”

Of course, knowing what those numbers mean in terms of the rest of the industry is a question that can only be partially answered. As a jobber, you will probably have to compare notes with others within your distribution group, but a comparison of benchmarks for the industry at large remains elusive.

Activant is currently working on a program to address that. Rod Bayless, product manager for the company, has specific responsibilities for developing these automotive analytics. So far, the most extensive work has been with the Aftermarket Auto Parts Alliance, recognizable by the Auto Value identity in Canada. The concept is most often referred to as a data warehouse, which allows indvidual jobbers to access aggregate data from a wider collection of businesses, whether from a single distribution network or the market at large.

“Our implementation to date has been with the Alliance,” says Bayless. “Their members individually aren’t as competitive as they can be. As a program group they can band together their information and link suppliers to their data warehouse, and get more involved in category management rather than anecdotal information.”

The potential upon the expansion of the concept is to allow individual jobbers to see how they are doing against their own group, as well as the total market. This is currently in development with Prism system users.

“We have signed them up to a market data program. It gives them the ability to connect to a data warehouse so they can see trends in the way that a two- or three-outlet jobber can never do because they just don’t have enough data.”

Bayless says that the company hopes to be able to provide the first set of full data this year. The data can be quite detailed, but the level of detail by application, not just part number, has some real potential to uncover true market conditions when part numbers cross a number of years and a variety of applications.

For example, is the reason that much, but not all, of your calls for brake friction for the Cavalier application is falling to the value line because Cavalier owners are cheap, or is it because most of the Cavaliers in your area are more than 10 years old? Is it age-dependent or application-dependent? And what of the same part numbers that cross from Ford to Mazda applications?

“The target is to be able to provide benchmarking data this year. I think the data warehousing, the concept of getting aggregate information is really key,” says Bayless, adding that the payoff is becoming a better merchandiser, more accurately fitting market offerings to the customer.

“If your computer system is too hard to use, you are less likely to get to your reports, and you are less likely to get good work done,” says Balestrini. “Your system could have all the capabilities in the world to tell you how many times a box was opened, all the bells and whistles, but if they are hard to use, you are not going to use them.

“Owners can’t be sitting at a computer for three hours figuring out how to build a report.”

“It’s really management reports that I feel are the crucial guides,” says Peter Quattro, president of CAPP Associates, an IBM Business Partner. “The management reports should tie in all aspects of the businesses, right down to accruals. What your cash flow is, basically. Can you support $3 million in inventory or is $2.45 million your limit?

“In the mom and pop shop, two or three reports would be fine. But in a bigger environment you have many people making decisions for you. You have to streamline the net effect of those decisions. Some of the buzzwords are dashboard or scoreboard. They are all achievable. The key is to have data stored in full detail, with the indices and the searchable fields. If you group the data, it’s a melting pot. Comments and notes and text are of no value when it comes to running performance analyses.”

Quattro says that the lack of capability of older systems has bred some poor habits, even when a newer system is implemented.

“People stick with the traditional concepts of ‘what do I need to know’. It’s only when you gain access to query tools that you can see the unlimited capability to expand the queries.

“Back-end reporting is a place where many people don’t even bother to go. That’s where the future is. The bigger players are analyzing their back end more than their front end,” says Quattro.

“It is being able to analyze the total business that puts money on the bottom line.”

In addition to standard sales and profit reports, consider running these to see what they show you. You can probably think of others.

Comparison Reports

Lost Sales Reports

Exceptional Pricing Reports

Average Invoice by Customer

Warranty Rate by Customer

Warranty Rate by Line

Returns by Customer

Gross Margin Return on Inventory by Category

Sales by Sales Associate

Margin by Sales Associate

Returns by Sales Associate

Average Invoice by Sales Associate

Share of Business by Customer

Sales Versus Credits by Customer

Line Split by Application (Brand vs. Value Line)

Sales per Square Foot of Showroom

Slowest Mover by Part Number

Lost Sales by Application

Popular Vehicles by Customer