When I started in outside sales, the Sales Manager handed me a 3-ring binder and walked over to a map on the wall. He raised his arm and, with an extended finger, pointed at the map, drawing a lazy circle around an area an hour from the office. He said, “We don’t have customers in this area, so you can call on anybody you like.” It was virgin territory with no list of customers or prospects. That was my training!
Decades later, I became the manager of a wholesale/retail business. In the beginning, I watched the operations to see how things ran. Quickly, I began to notice inefficiencies.
Customers would come in, and all the counter people were busy, so a manager would have to stop what they were doing and wait on a customer. I wondered what the counter people were doing that was taking so much time.
It involved two things: pulling their orders and calling around to suppliers to find specialty items, then creating purchase orders and sending when they found items.
It was Bad
Both issues needed addressing, but it got worse.
The next discovery was that they were calculating the selling price for each item on their own. I began looking at the invoices and tracking back to the purchase orders and discovered in many cases, they were selling items at a loss. When questioned, they explained they were taught to “get the cost and multiply by 2.5.” That was supposed to be a reasonable price.
The problem? The freight cost was not considered, so it was absorbed by the company and not charged to the customer for their special orders.
A customer ordered five each of an item. Our cost from the supplier was $2.00 each. With the 2.5 multiplier, the counter person sold them to the customer for $5.00 each. Five times $5.00 is $25.00. It looks like a decent profit until I tell you the UPS charge for bringing the items to us was $15.00.
Adding the cost of the items, $10 plus the UPS charge, $15, you get the picture. Just the items and freight were the same as the selling price, $25.00 Not counting time spent, and all the personnel that had to touch the PO and the order at Corporate. How much did we lose? Probably twice the cost of the items.
Why do I bring this up?
Inadequate training does not constitute training
I then conducted a training session for the counter people to explain. They were shocked, to say the least, to learn that their training cost the company money, instead of making it money.
So who was responsible for their training? I was once I found the issue. My question is who should have caught this earlier. The 2.5 times cost was the standard practice in place for many years. I can’t even imagine the money the company lost over the years. And, they had nine locations, all taught the same thing.
Has This Happened to You?
I’ve noticed a pattern around this type of training. Since it needs to be universal and simple, it is easy to make it too easy and too simple.
This practice in place at nine locations and used daily and weekly, must have devastated their bottom line.
What is your experience with this type of problem? I am curious if this goes deeper than a few isolated cases.