John Nicholas

Making Money in Hard times

Answers Systems — Fri, 20 Aug 2010 20:16:33 GMT

by John Nicholas

Not only do we have an economic downturn, but today's businesses must navigate a number of major issues from heightened competition to a demand for more customized product. Even in tough times, a successful company must deliver on the bottom-line. There is a tendency and a mindset with most every company that to increase revenue, you just need to move more product out the door. In a challenging economic environment, the pressure is especially on to increase sales.

The obvious problem is that when money is tight for individuals, it is hard to just sell more. Companies must look for additional ways to boost revenue. That means not putting up with some areas that there has been ongoing revenue lost (and every organization has those areas of loss that they have been turning a blind eye to). Especially in times like this, you must get some of the money back that you have been leaving on the table! This means simplifying, standardizing and continually improving processes in every area of the organization.

Automating manual processes boosts productivity and real-time access to more accurate information. This is a key component to businesses achieving new levels of efficiency and profitability. This includes improving cash flow by reducing order to cash cycle times. It means reducing costs by eliminating manual processes and establishing real-time visibility allowing you to better manage inventory. It especially means better managing the company’s network of business relationships. The management of this network of relationships is of course the essence of supply chain management.

Successful supply chain management requires focusing on improvements in performance that result from better management of key relationships. To do this you must improve visibility into your business. At Answers Systems we are dedicated to helping our foodservice manufacturer clients not only improve their processes but also unlock the full value of their data assets! We do this in several areas:

Sales/billback data collection (from almost 2000 distributors and operators. We acquire it, map it, and scrub it, providing a clean electronic feedback to our manufacturer clients.
Contract management ( our system captures terms of deals, has a robust approval process, and monitors compliance & performance)
Claim reconciliation and claim settlement (verifies and reconciles, and settles terms of agreement against the claim) Our push button rebill process, (for ineligible deductions), is successfully collecting up to 80% of everything rebilled.
Analytics and reporting (performance, compliance, who is buying and who is not, detailed profitability, etc)

There is a whole lot of money left on the table by most foodservice manufacturers. Our job at Answers Systems is in helping them get many of those dollars back, and it is working! We are seeing significant ROI for our manufacturer clients through improving and automating processes and in increasing visibility to vital parts of our clients business.

Spoiler Alert: Deductions

Answers Systems — Tue, 06 Jul 2010 19:20:44 GMT

by John Nicholas

If you do not want to know what happens for most foodservice manufacturers concerning ineligible deductions read no further.

Unless a manufacturer has a very quick way to validate, reconcile and process claims, in most cases a request for payment from a distributor will turn into a deduction. In fact, here at Answers Systems we find that an average new client is settling at least 80% of their claims by deduction and some 20% by check. Our Distributor Liaison Team and Settlement Group know the distributors’ deduction windows. We process claims very quickly. We make sure the distributor has the check before they deduct. As a result, we often times can flip that percentage to 80% settled by check and 20% by deduction. (If a manufacturer has a big part of their portfolio in U.S. Foodservice, which settles all claims by deduction, then obviously the percentage of claims settled by deduction with remain somewhat higher)

At Answers Systems we try to keep deductions at a minimum. Why? The reason being, if there is something ineligible in the claim, you can short pay the check and send it with the accompanying, needed back up to justify the short pay and you are done with it. Deductions have to be handled several times in processing. Then, if there is any part of the deduction that does not match the original agreement, there obviously has to be a rebill process for that ineligible part of the deduction. The ugly truth is that most manufacturers have little or no efficient system for that rebill to happen. Mistakes happen! There are errors in claims! That means that significant revenue is being lost because many manufacturers do not have a way to quickly identify ineligible deductions, let alone rebill for them. Just to let the reader of this know what is possible, we receive 95% of claims within 10 days of invoice date. Clean claims processed for payment ≤ 12 days.

Here is another thing. If a manufacturer is going to be successful in rebilling for ineligible deductions the key to actually getting the money back is once again, speed of processing. Distributors close their books to past claims relatively quickly. If a manufacturer is not rebilling within the first 30 to 45 days their chances of getting any money back is very slim. If, however, you can identify the ineligible deduction very quickly and rebill with proper back up, we have found that our more mature clients are recouping 75 to 80% of the deduction rebill.

Contact Answers Systems today for more information about our claim settlement and ContractPro trade promotion management solution.

One Size Does Not Fit All

Answers Systems — Tue, 09 Mar 2010 14:25:33 GMT

by John Nicholas

The Foodservice Industry is changing. Foodservice has evolved to a $600 billion industry. Along with growth comes “growing pains”. Manufacturer’s trade promotion spending now totals more than $70 billion annually. Where foodservice trade spend was just a black hole that companies tried not to think too hard about; the elephant in the room has grown to extent that it can no longer be ignored. There is a new awareness of the need for more accountabilities, and greater transparency in not only where the money is going, but what is the bang for the buck? Up to this point, many companies have tried to manage trade promotion spending with solutions that are geared toward retail/grocery. It does not work! I hear time and time again from companies how they want a solution to manage both the retail and foodservice sides of their business. That solution does not exist! There is no one size fits all solution! The food service industry is unique in its culture, vocabulary and processes. As a result, companies employing retail oriented solutions struggle to manage trade spending dollars and track operator performance in the foodservice vertical. Processes lack data integrity. Contract information is stored in multiple files at various locations. There is no transparency into the business. Many companies have very little idea of what is being sold where, let alone have a way to measure the effectiveness of their trade promotion spending. Answers Systems Can Help! We have developed a system that is completely devoted and dedicated to managing the foodservice side of trade promotion spending.

Our full-cycle contract management center provides a powerful tool for creating, managing and analyzing your distributor and operator deals. Additionally, our software can help you with the reconciliation and settlement of customer claims.

Collection of sales/billback data (from almost 2000 distributors and operators with approximately 70% of the data being electronic)
Management of contracts (capture terms, approval process, monitor compliance & performance)
Claim reconciliation and settlement (verifies and reconciles, and settles terms of agreement against the claim)
Our push button rebill process, (for ineligible deductions), is successfully collecting up to 80% of everything rebilled.

Analytics and reporting

What accounts are in compliance with your agreements
What accounts are underperforming
Profitability of an account
How geographies, customer groups or sales people are performing
What sales impact any marketing activity has on your business

Give us a call. We would love to take a deeper dive and show you the significant hard dollar ROI that could add to your bottomline!

A Day in the Life of a Foodservice Manufacturer CFO

Answers Systems — Tue, 16 Feb 2010 20:42:35 GMT

by John Nicholas

Todd is a CFO for a mid size foodservice manufacturer. He is frustrated! He just asked his Director of Finance to provide him with a report on the dollars and cents impact of raising the price on one of their SKU’s. He simply wanted to know, based on last year’s sales, what the price increase would mean for their bottom-line. It seemed like a simple request on the surface, but the Director of Finance explained to him, that before she could get the numbers to Todd, she needed to analyze what accounts that were selling that specific SKU. She had to then see where there was a guaranteed or fixed price contract in place. She then had to figure what percentage that fixed price business was to the whole and factor it out. She explained to Todd that she could do it, but with a year end audit coming up, it would take a lot of work and time to nail the numbers down. So Todd was left with the realization that significant potential dollars that this price increase represented needed to sit for at least several weeks!

That, of course, was just a piece of the puzzle. Todd also needed to get a feel for what price the market would bear. He needed to know what their major competitors were pricing at. Todd approached the VP of Sales. Who better to know what competitive pricing is? The VP explained “with over a hundred SKU’s in a very volatile market place, I just don’t have competitive pricing at my fingertips.” He told Todd that he could send out a query to the Regional Sales Managers and Brokers.” He went on to say, “however, the sales organization is focused on our quarterly sales promotion. I can get the information to you in a couple of weeks at the earliest.” So much for being a fast moving company in a very competitive environment as they discussed in the company planning meeting!

This is typical of the challenges we hear from the Finance Executives in foodservice manufacturers all over the country and Canada. Answers Systems solves this problem with capturing all the contract information and putting it in an electronic file cabinet. That contract information identifies whether it is a deviation off of list, or whether it is a fixed or guaranteed price. When the sales person or broker initiates the deal, the contract information also captures why the discount or guaranteed is being offered, including whether it is matching or beating competitive pricing. The process provides a place to capture this competitive pricing with every contract created. Answers Systems does not stop there. Our system, the ContractPro solution, electronically bumps all the contract information, against sales into distribution, also comparing it to the billback information. (Answers is collecting from almost 2000 distributors). The Answers Systems reporting and analytics tool then gives visibility into a manufacturer’s business like never before. With a few keystrokes Todd, for instance, could have seen the very information he was needing to drive a profitable business. He could see detailed profitability reports, compliance reports, competitive pricing, etc. Bottomline… you don’t have to drive your business in the dark anymore!

Technorati tags: finance, foodservice, contract management, competitive pricing, ContractPro, Answers Systems

The Times They are a Changin'

Answers Systems — Wed, 07 Oct 2009 19:04:42 GMT

Posted by John Nicholas

I am old enough to remember life before computers. There was no real information to guide business decisions. I had to rely strictly on my good looks and personality. Okay, I exaggerated; I just had my personality to work with. But the point is that I remember a time when everything was based on relationship, not numbers.

“Back in the day”, as a foodservice manufacturer rep, if I had a great relationship with a distributor or operator buyer, many times I could get any number of SKU’s into the distribution house regardless of whether anybody was buying them! The buyer did not have the information he/she needed to have a good handle on what was going out the door. What he did know was that I was his friend. I played golf with him, knew his wife and kids, and remembered his birthday. Trade Promotion Management or Trade Spend Dollars in those days were much more geared toward relationship oriented events. Hunting, fishing and golf events with buyers and brokers were a big part of the marketing budget. In a lot of cases, gifts to buyers were more common than sheltered or earned income programs. Even though there were abuses, I sometimes miss the days where things seemed more personal. I still think, for instance, that a good sales person focuses on the person they are selling to, and not just on making the sale. It is still a people business! I still think it is important to have relationship with the people you do business with. It is good to know the person that is sitting across the desk from you is a person who can be trusted. Knowing that a person’s word is their bond is still a very valuable commodity. Integrity means your words & your actions line up with each other. If a person of integrity begins a job, they finish it. If a person of integrity makes a promise, they keep it. If a person of integrity makes a mistake, they admit it. A promise is a promise whether it is to prospective buyer or seller, to your boss or to your husband or wife or children. Integrity means you do everything within your power to keep commitments. Those things used to have more weight and importance than they seem to have these days. I hope the content of our character will always be more important to us than spreadsheets and graphs.

So now that I have taken a trip down memory lane and extolled the virtues of the good old days, allow me to shift gears. I am not suggesting that you should run your business on blind trust. Relationship and the personal element should never just be thrown out the window, but the story the numbers tell is an absolutely necessary consideration in making intelligent business decisions. The relationship part comes in when for instance a SKU is dipping below some hurdle rate that has been set by a distribution house. Rather than a buyer just dropping the product, when they know it is represented by a rep who has busted their butt for them, the broker orfoodservice manufacturer rep is given a chance to turn things around. I believe numbers alone should not produce dogmatic and arbitrary decisions. Forget the people who brought you to the dance and it will eventually come back to bite you. Perhaps this all sounds somewhat schizophrenic, but I believe that keeping sight of people and having the information you need are both critical elements to a successful business.

The information part has been slow in coming. As information technologies emerged, distributor and operator buyers were some of the first ones to benefit from them. They started having information at their fingertips, that was a pipe dream twenty years ago. No more does a SKU sit month after month without any sales and nobody even notices. The numbers tell a story. The problem in recent years is the information was one sided. The distributor was the only one that had any! The distributor has total visibility into sales by SKU by location. The foodservice manufacturer in many cases only knows what is sold into the distributor. It makes any negotiation about bracket pricing, earned income, sheltered income, commitment to distributor trade shows, promotional pricing, spiffs for the distributor sales reps, etc., pretty one sided. Until recently, the foodservice manufacturer or broker has had nothing to use in negotiating the increasing price tag of these support programs. The game, however, is changing!

With trade promotion management applications such as what we offer at Answers Systems, a foodservice manufacturer now can have visibility into their business like never before. For the first time they can lay a report on a buyer’s desk that shows an analysis of contracted business compared to street business. If a lion’s share of the business going through a distributor is driven by the contracts that a foodservice manufacturer has in place with buying groups, GPO’s, contract management companies, or operator chains or groups, then that certainly needs to be part of the conversation. Information is power. It is the critical component in any good negotiation and can be used to leverage much better deals.

There are several critical components needed to enable a foodservice manufacturer to harvest the data that is needed to produce these kinds of reports. You need to centralize your deal or contract information in an electronic file cabinet. You also need to acquire, map and scrub the billback information. You need to know who bought what. Even after all of this, unless you have an integrated system that gets all these critical parts talking to each other, then the information remains an untapped resource. Interpreting the data with an effective reporting system is the key that unlocks the door.

Foodservice manufacturers can now see which operators and operator groups, buying groups and contact management companies are in compliance with their contracts. They can know whether to renew a deal or not based on the actual past performance. They can also have a much better picture of market penetration. They can target promotional dollars on what actually works.

While strong relationships are still the backbone of successful business; numbers, information, analytics and reporting have changed the game and made us all a lot better at what we do. As Bob Dylan once declared “The Times They Are a Changin!”

Technorati tags: foodservice trade promotion management, contract management, trade spending, sales

The Emperor Has No Clothes

Answers Systems — Tue, 22 Sep 2009 14:18:18 GMT

Posted by John Nicholas

Over the past eight years I have interviewed scores of foodservice manufacturers. At some point in the conversation, I ask them whether their sales and marketing efforts and trade spend dollars are primarily geared toward operators or distributors? Every manufacturer recognizes the value of their distributor partners, and the need to support the distributor’s efforts in getting their products to market. Having said that, most manufacturers feel more than a little queasy about casting their fate on a distributor’s effectiveness in driving sales. Therefore manufacturers will almost universally contend that their sales and marketing strategy centers on operators not distributors. Manufacturers tell me almost without exception that they have an “Operator Based Sales and Marketing Strategy." They want to believe that the lion’s share of their sales efforts and trade spend dollars are targeted toward operators. There is a huge disconnect here! Deep down, most manufacturers recognize that they do not have the information they need to effectively reach their operator customers. A successful sales strategy must be founded on good information. Everyone in the manufacturer’s organization, whether it be sales, marketing, or finance keeps telling each other they have an Operator Based Sales and Marketing strategy when it is obvious on close inspection they do not. It is like the old story by Han Christian Anderson, “The Emperor Has No Clothes”, everyone is afraid to admit to the truth. What is the inconvenient truth? The truth is that most manufacturers don’t even know who their operators are! While they are aware of a few operators and groups, they don’t have a full handle on what individual units make up these groups. Manufacturers, more often than not, do not know whether their customers are in compliance with their contracts. Because they lack knowledge (data) they don’t know how effective they are in various business segments i.e. Healthcare, Colleges and Universities, Business and Industry, Restaurants, etc. This leaves them unaware of what price points are working and where they are working, they don’t have a good feel for SKU penetration or geographic preferences. Their Operator Based Sales Strategy is more accurately stated as less of a strategy, and more of a hope and dream!

Then, with the added tension between manufacturers, distributors and brokers arises that age old question “Whose Customer Is It?,” manufacturers are left wondering who is buying what? And so, manufacturers blindly throw money and people at their operator business, not really having the information they need to know whether it is well spent or not. Where you spend most of your money does not necessarily determine your sales strategy! You can have on paper pricing incentives for operators, and other so called targeted marketing programs, but if you don’t have the ability to see the sales into the individual units, track effectiveness of promotion dollars, and make specific course corrections, then you are just throwing money on the proverbial wall and hoping something sticks.

Now I know a lot of this is sales and marketing 101, and that I have stated some pretty obvious stuff that most people in the foodservice business understand very well. Still, my point is that without having a well-developed trade spend process and the systems to support it, an Operator Based Sales and Marketing strategy is impossible.

So what must manufacturers do to truly have an Operator Based Sales strategy AND get the data needed from distributors? The truth is that manufacturers get more information about their operators than they think they do. Much of this information is coming in on the claims against the price deviations and various programs that you have in the marketplace. The challenge is filtering this data out of the claim and making it usable. Understand this, you can get what information is owed you. You are entitled to anything that you have a deviation against. Even so, in case you haven’t noticed, the data doesn’t just fall into your lap. There are several critical components here if you are to harvest the data that is available to you. First of all, when you set your deals up with an operator make sure that as part of your agreement, you require a breakdown of sales to the individual units on the claim. Once you have the agreements in place, the next thing you have to do is ask for the data that is owed you. Next you need to collect the billback information from distributors, from operator direct programs, from buying groups, from contract management companies etc. Unless you are able to map the data, and scrub it, and convert it all into an electronic format it is going to be a big pile of useless data. You must understand, even if you map it, scrub it, convert it to electronic data, unless you have a way to effectively view the data and use the data then it remains an untapped resource. Interpreting the data with an effective reporting system can literally be the difference between piloting the ship to home port or ending up on the rocks. You cannot have any kind of successful sales and marketing strategy to operators without some transparency into unit level sales.

Another key component of managing sales and marketing to your operators is effectively managing your contracts/deals to them. You also must be able to put deals and contracts into a centralized electronic file cabinet and bounce your claiming data against it, so you can monitor how effectively you are spending your money and identify compliance issues, etc.

So to recap, to have an effective Operator Based Strategy you need to have a trade management process that effectively manages contracts, acquires maps and scrubs sales and billback data, and harvests valuable information from claims. You need to have an integrated system that has all these parts talking to each other and as a result generates reporting and analytics that provide the foundation of your strategy. Once you can see where you are selling what, and can see what is working where, then you can marry some of this information to a CRM tool with actionable items for your sales force. Your marketing efforts can truly be targerted and you can start spending money only on what works. You can have a successful Operator Based Sales Strategy and just maybe the emperor can get his clothes back on!

Technorati tags: foodservice manufacturers, trade spend

Technorati tags: operator based sales strategy, buying groups, billback