An engine is a device made up of a great many small parts, which together form something capable of delivering great power. An economic engine is similar, and it comes from the many components that together make up our company. Our economic engine is what allows us to make enough profit to not only stay in business but to continue to grow.
From the perspective of many outsiders, it can seem that because we sell premium products it must be easy for us to prosper. But this is far from the case and in fact it is becoming more of a challenge every year to remain profitable. Yes, our products have premium prices, but that is because the products we sell are of substantially higher quality, and our commitment to sell at this level limits our total sales volume.
Qualifirst is the biggest â€œstrictly gourmetâ€ national food company, however most national food companies are not strictly gourmet and they are much larger than us, which means they can hedge against the lower total sales of premium products through the greater volumes allowed by average and even discount products.
And Highly Specific:
We are also highly specific. We ship orders that are relatively small and that contain many different products. That is one of our unique value propositions, and is something we do very well. But it also means we spend more per order, in terms of taking the order, picking, packing, checking, shipping, invoicing, and asking for, and then processing the payment. Freight cost alone represents a very high percentage of the order.
When we sell a product, we don’t just pay for the product itself; we have to pay the shipping, sales and processing cost in advance. When we sell $100.00 of anything we don’t get to keep most of this revenue. After processing costs, we get to keep maybe $20.00, and out of that we have to pay for spoilage, labeling, returns, rent, office supplies, warehouse supplies, payroll, technology, and still have enough left over to invest in the future.
Costs are going up for everybody:
With costs going up every year and with a limited ability to raise prices, this becomes more and more challenging. We are not unique in having these challenges. Basically any company that is in private sector business faces these same types of issues. In addition, we do have a strategy that will help us grow and prosper and continue growing.
For me, strategy is very much a full time job, since working on a strategy is what is necessary to take us all to the next level: not just survive, but to prosper and be the best at what we do.
Here’s where the â€œengineâ€ analogy comes into play in two different ways. I have just described many of the small components that go into the cost of doing business: all of those tasks and items that we have to pay for up front that go into the $100 sale. They are the components that go into a sale.
Every person contributes to profit:
On the flip side is the engine that makes this all happen: the constituent parts of the Qualifirst machine, and this includes every employee. When a member of a team feels that their contribution is negligible or has no impact, then they have not yet seen the bigger picture. Qualifirst is a small company and as such every person contributes significantly to our capacity to succeed. Success is not based solely just on the items sold, it comes from the full spectrum of the company; from many different aspects, techniques and people that combine to create the perfect opportunity for maximum profit to occur.
Here are some typical and very specific questions that we â€“ any of us â€“ could ask. The answers to these questions help contribute to the smooth running of our profit engine:
- Was the order entered in time? Order entry delays or delays related to accounts receivable can cost the company up to $10 per order.
- Did we select the correct courier for the products included on the order? This mistake has cost us thousands of dollars over the years. For example, shipping chocolate products with a courier who doesn’t use refrigerated trucks turns a profitable order into a gloppy loss.
- Was the order packed correctly so as to avoid damages? A $40 jar of artichokes that gets broken in transit costs us both the price of the product and its original shipping, plus reshipping of the replacement.
- Did we send the right product? Any replacements and reshipping based on incorrect fulfillment costs us around $40. That might not seem like a lot as a one-off, but it usually turns a shipment into a loss.
- Did we make a profitable sale? Sometimes a slight increase in total billing has a great positive impact, when the picking, packing and shipping costs do not rise proportionally. For example, achieving a $300 order from a client instead of a $200 order is a win for everyone.
These are just a few questions out of many that can be asked specifically about your role in the ongoing sales and fulfillment process. Any employee of any company who feels they do not make a difference needs to understand the specific role they play, not as an anonymous employee, but as a specific cog in the economic engine of the company. If they can’t see this clearly at the moment, then they need to feel sufficiently empowered to ask and to be taught.
Stay in Business:
Basically any business who wishes to stay in business need the help of every team member to be conscious of costs help the company grow.