Try These New Tools from the ProDealer Summit to Spot and Fix Profit Leaks
From simple math calculations to sophisticated AI reports, the ProDealer Industry Summit gave LBM executives an armful of tools and tips they could use to generate higher profit margins at a time when sales prospects are tepid at best.
Kristin Andrews, Director of Business Process Optimization at Michigan's MANS Lumber & Home, sounded this theme when she offered up an interactive "Price the Fiction" tool to help dealers quantify how many dollars and hours they may be wasting because they aren't taking advantage of new productivity advances. The numbers you calculate using the tool can help motivate a more general effort to examine and then improve processes, she said.
Given how artificial intelligence is all the rage, Andrews urged the summit attendees gathered in Chicago on Oct. 5-7 to look at their processes first before telling AI to automate the status quo. “Automating a bad process just gives you a bad process that runs faster,” she said.
For instance, MANS discovered from interviews with its staffers that the team members had dramatically different ideas regarding how to do installed sales. So Andrews standardized things, creating a single flow chart for all involving more than 30 steps organized into nine shared buckets.
Rules first, AI second, Andrews said. That's quite similar to what John Marshall of AI Growth Partners said in his presentation. Marshall believes AI is regarded too often as merely a way to automate the status quo when its real strength is when it becomes a "thinking partner." Feeding it data and then setting it to work processing those facts enable AI to raise issues and spot problems faster than you possibly could. Often, he said, the result is that generalities like "the market is soft" or "customers are pushing back" or "everyone is cutting margins" apply only to some of your customers and sales reps.
Marshall recommended dealers instruct AI to perform tasks using what he has dubbed the CARGO approach. That's an acronym for:
Context--Give AI the information to be examined, such as a spreadsheet listing customer sales year-over-year.
Actor--Tell AI what role it is to play in handling the data, such as senior sales analyst, CFO, or CEO.
Request--Tell specifically what you want AI to do with the information. For instance: "Break out our 3% revenue decline into four buckets: new accounts, accopnts that grew, accounts lost entirely, and accounts that shrank. Which bucket explains the most dollars?"
Guardrails--Tell AI what you DON'T want it to do: No estimates, no filling in the gaps, no use of data other than what's in the context. Also, tell AI to show its arithmetic, so you can spot-check the report. “If it’s wrong 15% of the time, that’s okay," Marshall said. "It’s my job to catch it.”
Output--Tell AI how you want the results; a short summary followed by a ranked table, for instance. If you just want numbers, tell it to skip giving recommendations.
Such an approach increases the odds of you getting useful results. Then you can spend your time getting to the next level of your problem rather than trying to fix less-the-useful results from the first query.
Sometimes, simple math is all you need. Sales consultant Mike McDole of Firing Line LBM Consulting urged dealers to teach their sales reps how small errors can have big consequences. For instance, consider a dealer with a 4% net profit where a rep made a mistake on a $1,000 special order that had to be credited back to the customer. It takes $25,000 worth of new sales to make up for the $1,000 lost by that error, he noted.
Similarly, sales reps need to learn how much it costs to deliver a product. Suppose a delivery costs a dealer an average of $6 per mile traveled. A roundtrip to the jobsite of 50 miles thus costs the dealer $300 in transport costs. If a sales rep writes down the wrong address, or forgets to add a product to the shipment, and an extra trip is needed, that $300 can wipe out a lot of profit.
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