How to create a culture for innovative forward buying – feat. henry schein inc.
In today’s podcast: Henry Schein Inc.‘s Senior VP of Supply Chain Paul Rose
The best opportunity to influence your income statement is to attack the Cost of Goods. Wholesale and retail companies live on thin margins. So any efforts that reduce the Cost of Goods can have a dramatic impact on your company’s profit picture. Forward buying is an excellent strategy for doing this, and it all starts with CULTURE.
In Episode 5 we are joined by Dan Craddock and special guest Paul Rose of Henry Schein, a Fortune 500 distribution company with more than 300,000 health care products in 31 countries.
If you enjoy this podcast, please take a second to share it with your teams. And, here’s some additional information on forward buying…
Episode 5 Show Notes
Q: Welcome, guys! Dan, when I asked you for a name of a distributor to speak on the benefits of Forward Buying you didn’t hesitate one moment with your answer. What made you think of Paul so quickly?
A: Todd, I have been working with hundreds of retail and wholesale companies, but even many of the most successful distributors I know point back to a session where they heard Paul speak.
It’s not just a matter of understanding the topic and responding to deals that are offered. Paul has pioneered a culture and a process that has completely changed the role of the Inventory Investment professional.
Q: Paul, tell us a bit about yourself and Henry Schein before we dive deep into our topic.
A: Paul answers and shares about Henry Schein
Q: Paul, what is the key to this CULTURE you have created?
A: Todd it’s FOUR key things:
- Develop a Passion for Profit
- Spend money to make money
- Educate your team
- Provide the team with the tools and information
Q: Paul, can you share at a high level what the benefits have been?
A: Paul shares benefits to Henry Schein
Q: Paul, how long have you been doing this? It sounds like you and your team are at an advanced stage. A maturity model.
A: Paul shares how things evolved and introduces how they got started in the early days.
Q: Education: So how did you initially go about Educating Your Team for this venture? That had to be critical?
- The team needs to understand a picture of your company’s income statement and how they impact it
- They then need to research the financial pictures of their suppliers
- They might be shocked to see how much higher their net profit picture is
- Our supply chain planning partner was a big help to us in the education of our team
- Make the victories very public; victories lead to confidence and more victories
- The fly wheel effect is strong here once it gets going
Q: Okay Paul, now our audience is inspired. They want the same results! Please share the foundational outline and steps for building a great Forward Buying / Inner Margin Program.
A: Great… It starts with Purchase Price Management. Todd, as a distributor, inflation can be your best friend.
Here are steps for Price Management:
- Assign ownership and goals for all price activities
- Monitor prices daily for:
– Price increases (WITH and WITHOUT notification)
– Price decreases
- Review all price discrepancies / invoiced prices that are too high or too low
- Correct these with the vendor
- Notify Marketing and Sales of price changes ASAP to ensure sales price changes
But you do need a rock-solid strategy on Deals.
- Someone needs to watch all Deal activity and make sure you don’t miss one deal, or one dollar off of any deal.
- Make sure there is a tight process through to Payables to ensure you are always getting the discounted prices.
Q: So those are the basics… but for you, things are just getting interesting, correct?
A: That’s right Todd. This is where the opportunity begins. The opportunity is in Creating Your Own Deals!
Part of the culture of our team and our daily efforts is reaching out to create our own deals. Most companies sit and wait for vendors to call them at the end of the year, or end of the quarter, when they need to hit their numbers. Those companies are leaving money on the table!
Create a strategy and an infrastructure to work your own deals.
Q: So I see, Paul, that your first step is Vendor Relations. Is this the Preparation stage?
- Establish great relationships throughout the supplier organization, including the head of production!
- Identify vendors with YTD purchases lower than the previous year
Identify vendors that offered a deal last year, but not yet this year
- Preview items with upcoming marketing events for items with prior deal activity
- Analyze Open POs to find open order items with On-Order quantities
- Evaluate Alternate Source and Multi-Source opportunities
Q: Paul, when does the team reach out for these deals? Do you time it around the calendar or certain events?
A: The obvious ones are End-of-Quarter and End-of-Year, but there are so many more:
- If a vendor double-ships an order, before returning it… we offer a strong deal to keep it
- Examples of other unique situations
Q: How does the team react when they win a deal? Has it changed your structure? Your atmosphere? Do they earn any bonus?
A: [Paul responds]
Q: What are some uncommon areas of opportunities?
- Vendor Credit Card implementation
- Review commissionable dollars as it pertains to inclusion of freight charges
- Alignment of Private Label price changes
Q: Paul, we have covered quite a bit!
Finally, what are the key points you want to share with a company getting started?
A: [Paul gives three key steps]
If you have any questions on creating a culture of forward buying or any other topic, drop a line to PlanningPosts! Don’t forget to share this with colleagues.