How much money do you leave on the table? That's a question that we often ask in our office. Though the company that I work in is a manufacturer's rep agency, my company is no different than the kitchen and bath dealer's in that we all seek to control costs and maximize profits. Making the most of the manufacturer programs offered to dealers and distributors is frequently an overlooked method in accomplishing this.'
Cabinet manufacturers offer a wide variety of programs that reward their customers in many ways, ranging from increased education to increased profit. Most of the time, all that the manufacturers ask in return is that you sell their product and pay them on time. That's a pretty good deal, and if you're not fully realizing the benefits of these programs, you're leaving too much on the table.
Manufacturer programs can include, but are not limited to:
samples, displays, training, return rebates, promotions and payment
terms. Each of these can be of great benefit to your company, but
it all depends on your diligence in employing them.
One of my favorite adages in the industry is that "customers buy what they see." Most manufacturers offer programs to help dealers and distributors display their products. This can represent a large and ongoing expense, as displays and samples need to be updated. As you add and replace displays and samples, make sure that you utilize the programs available to you.'
Most manufacturers offer discounts for this and some will even offer exchange programs. A company can realize significant savings if it takes the time to understand the available programs and follow through with any requirements set forth by the manufacturers. It's in your best interest to fully utilize these programs. The more you can decrease your share of display and sample costs, the more flexibility you have in applying capital to other areas of your business.
In addition, many manufacturers are now offering extensive training programs. Whether they are held at the factory, provided for specific regional customers or personalized for your organization, they are an extremely good value to you and your employees. These training programs range from basic and advanced level design to sales techniques, and some even provide training for using computer-aided design systems.'
Many of the programs are taught by industry experts. They are expensive endeavors for the manufacturers, and a reasonable charge is usually assessed for attendance, but many companies will allow you to apply available co-op funds.'
Advertising is also an expensive but absolutely necessary part of any business. In the kitchen and bath industry, advertising can take many forms; Yellow Pages ads, local newspaper write ups, home shows, signage, builder nightsthe list goes on and on.'
Many manufacturers offer co-op advertising programs, where they share in your advertising expenses. Though they vary, most maintain a fund based on a percentage of your yearly sales and distribute it on a 50-50 co-op basis. What this means is, if you purchased $100,000 worth of goods from your supplier this year and they have a 1% 50/50 co-op advertising program, there is $1,000 in an account waiting for you to spend. Since it's a 50/50 co-op plan, you must spend $2,000 to collect the $1,000 in the fund.'
Your manufacturer will place requirements on the advertising and
as long as you meet them, you can collect from the fund. This is a
true benefit. You are already going to place Yellow Page ads and/or
use other means of advertising. All you have to do is abide by the
manufacturer's rules and you get a 50% discount. That's a pretty
good deal, but you must make sure that you claim it.
Many manufacturers offer various forms of rebate programs to their dealers. One of the most common is the Return Goods Rebate Program. These programs usually consist of the manufacturer offering a semi-annual or annual rebate to cover damaged or replacement goods, with some exceptions.
This program is meant to equalize the cost of return and replacement goods for both the dealer/ distributor and the supplier. But, in many cases, the dealer/distributor can add dollars to the bottom line by placing better controls over ordering replacement items. In many instances, better handling in the warehouse or making quick field repairs to "not so perfect" products can save having to order a replacement. Plus, better educating the consumer as to what to expect concerning graining and color variations can limit replacement doors and panels.'
Your goal needs to be to keep your replacement orders below 3%. If you can reduce your replacement orders to 2.5%, 2% or even 1.5%, based on the example, you would be adding an extra $500, $1,000 or $1,500 to your bottom line.
Discounts that manufacturers offer customers for paying them promptly is what I consider to be the most advantageous program available. Most manufacturers offer discounts of at least 1% for paying within terms and some will go much higher2%, 3% or even 5%. If a supplier's terms are 1% 10 days net 30, you can add $1,000 for every $100,000 in purchases to your bottom line just by paying on time. If the supplier's terms are 5% 10 days net 30, you can increase that to $5,000 for every $100,000 in purchases. This is a generous reward for paying within terms, and it's an easy way to increase your gross profit.
As you can see, there are many programs out there that can be
utilized to both promote your business and add to your business'
bottom line. You work hard to control expenses and maximize profit;
now, make sure you don't overlook the programs that your
manufacturers offer you. Don't leave anything on the table!
John K. Morgan is an independent manufacturer's representative who works with John H. Morgan & Associates, based in Baltimore, MD. A leading manufacturer's representative in the kitchen and bath industry for some 15 years, Morgan works with companies that span the spectrum of the kitchen and bath industry. The combination of Morgan's experience with cabinet manufacturers and his knowledge in the sales and training of CAD provide him with a unique perspective, which he will be sharing exclusively with K&BDN readers in his "The Rep's View" column.