If The Shoe Fits. . .

December 11, 2003 - 16:22

Business practices change. . . and not always for the better.

In talking with many industry players, from growers to wholesalers to breeders to input suppliers, I'm hearing more now about problems resulting from untimely and incomplete communication and decision procrastination than I've ever heard before. Maybe it's not any worse than in the past (though I doubt it), but the impact and increased prevalence are making lives -- and business operations -- difficult to plan and manage.

Maybe the customer is really trying to let us down easy by not saying "no" directly (though sometimes "no" is a good decision). Maybe the customer genuinely wants to have more information available to analyze before making that final commitment. Maybe the customer feels too overwhelmed to make a decision. Maybe the customer is hoping that the current business climate will change and is waiting until the last minute to make the final decision. Maybe the customer is hoping that, by deferring or delaying the decision, the price will drop. Or maybe the customer is trying to minimize risk by forcing the supplier to take on more of the liability for the decision by deferring until the eleventh hour.

Making Timely Decisions

Call it a lack of common courtesy that is the visible outcome of the dog-eat-dog business climate we deal with today. Call it the power play syndrome where the customer dictates to the supplier and the supplier will have to find a way to work on the customer's agenda. Call it the breakdown of partnerships between buyers and sellers. Or, call it the dilemma of having too much data to sift through and consider. . . analysis paralysis.

But for whatever reason, the net result is the same. By not making timely decisions and communicating with them in a clear, concise and complete way, we are putting the end result we (and the all-important consumer) expect at high risk. And we all need to be sensitive to the basic fact that this lack of decisions not only affects our direct business partner, but their suppliers as well.

I still go back to that Total Quality (TQ) adage that "we're becoming so adept at doing more and more with less and less that soon we'll be able to do everything with nothing!" Though this was said somewhat to mock the TQ process, the reality is that, due to bottom-line pressures to manage costs and profit, we may really have cut too deep into our ability to operate effectively and efficiently. That, and many retailers have become risk aversive and are fearful to commit too early because things might change that will effect their ultimate decision.

Our Holy Grail-type quest for increased efficiency is many times resulting in increased inefficiencies and compromised execution. Take for example the retailer who defers a final decision on a major crop he wants in the stores on March 1. The grower needs a commitment by September 1 to allow him to plan production (both of the new crop as well as around his fall production), purchase his inputs -- soil mixes, plugs or seed, containers, labels and chemicals -- hire or schedule the people to manage the crop and maybe even go to the bank to line up the credit to make this crop happen.

How Do They Do It?

One option for the grower is to bet the "come" line and hope that the buyer will make the commitment for the crop. Based on the hope and desire to ensure that, if the decision ultimately goes in his favor, he wants to make sure he can meet the March 1 delivery date with high-quality product, he goes out on a limb and makes all of his input purchases and plans his seasonal production accordingly. Now, if he gets the order, he's prepared to execute, and the buyer will be pleased with the result.

If, however, the retailer's order doesn't come through, then the grower is pressured to have to react to a bad situation. Some of his alternatives might be to try to sell off the crop at lower costs, maybe even a loss, to generate some cash flow. Or he might have to pay his input suppliers slower, creating a ripple effect down the line. And this can impact him long term because his supply partners will try to recover their shortfalls through shorter terms or higher costs on future purchases. And the grower may be a little gun shy in dealing with this retailer again: At least he'll hopefully build in a potential loss factor into anything he quotes that retailer in the future (not saying, however, that the retailer will be willing to pay the higher cost).

The second option for the grower is to defer his commitments to his input suppliers until he has the retailer's purchase order in hand. Now he has to ask his suppliers to jump through hoops to get him his inputs, creating logistics and distribution inefficiencies and adding to everyone's costs. Internally, he now has to modify the plans he made to accommodate this late decision. And, there's a real likelihood that, because the program started late, he may have to incur additional heating costs to accelerate the growth and, even taking this action, the crop still might be young, immature and not of optimum quality. So despite all of the work, effort and additional costs incurred, the retailer may be disappointed with the result, causing problems in securing future business or protecting existing business.

Is there an easy answer to the challenge of deferred decisions or procrastination on making commitments? Not really. But you can educate your customers on the repercussions of these delayed decisions and what the alternative outcomes are with regards to quality. You can establish comparative levels of expectations on timely vs. untimely decisions. Though difficult in today's business environment, you can build up the intestinal fortitude to stick to your timeline and say "no" to business that you know you won't be able to execute well and that may jeopardize your future relationships with that customer.

I'd love to say that a better business climate, a stronger economy and improved sales will allow us to get back to the way things used to be, with more business conducted based on relationships and outcomes focused on mutual gain. Unfortunately, this ain't gonna happen. With the continued industry consolidation and the focus on "my" bottom line, the business practices that have evolved in the past few years will become the norm, and we'll have to find ways to accommodate or work through/around them.

We commonly discuss and bemoan the problems and outcomes of procrastination and deferred decisions as it affects operations, production, logistics/distribution, labor, and lost efficiencies and costs -- and these are serious concerns. But deep down, if we take the emotionalism out of the discussion (and feelings do run strong on this issue), who is the ultimate loser? -- the consumer, the individual that we can't for a minute take our focus off of. If we take the impact of our business practices and decisions (or lack thereof) on the consumer out of this equation, we'll just continue down our current path, and it will be difficult to improve.

If we're all truly committed to providing the best products at a price point that won't disappoint the end consumer, we need to find a way to work together as partners to make better, faster and more timely decisions to create the efficiencies we can all benefit from.

About The Author

Stan Pohmer is president of Pohmer Consulting Group, Minnetonka, Minn. He can be reached by phone at (952) 545-7943 or E-mail at spohmer@pohmer-consulting.com.

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