Operational Model for ImprovingSystem Productivity of Distributors:Internal Cost Drivers

摘要

Distribution in specialty contracting is facing a fork in the road in its role in thesupply channel. It can continue to play its historical role of wholesale/retail combinationof parts pass through and hope to be profitable through speculations, or it can become alow cost provider of services and products by managing the channel.This segment of the research concentrates on identification of cost drivers fordistributors. The examples in this segment will be focused on Electrical Distribution.The principles, however, apply to all specialty contractor distribution channels.The cost drivers (CDs) are divided into three categories: CD by customer, suppliersand internal. This study further concentrates on three focus areas of their CDs:1. First-time pass yield of order taking and delivery2. Identification and reduction of waste3. Customer point of order entryThe three focus points will identify and eliminate waste driven by internalinefficiencies, customer miss ordering, and supplier’s impact on price and delivery.Every business needs to be profitable to survive. Profitability can only come throughsystem productivity. Productivity depends on recognition and elimination of waste in thecurrent process of operations. Further system productivity can be achieved by operationprocess innovation.Distributors can improve their bottom line by better than 30% by following the wastereduction methodology suggested in this paper. Improving the first time pass yield,inventory turns, and customer order entry point will be the key to increased productivity.