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.