Optimizing Human Capital Development

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Optimizing

Human Capital

Development

Distribution Research Consortia

INDUSTRIAL DISTRIBUTION PROGRAM Dwight Look College of Engineering

Achieving Distribution Competitive Advantage through People:

Best Practices in Acquiring, Developing, Managing and Retaining Talent

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Business Processes Process Metrics Finance Elements Financial Drivers

DISTRIBUTOR PROFITABILITY FRAMEWORK

Linking Business Processes and Shareholder Value

STORE SELL SHIP SUPPLY CHAIN PLANNING SUPPORT SERVICES SOURCE STOCK Gross Margin Days Payables Outstanding Cash-to-Cash Cycle Time Working Capital Inventory Turnover GMROII Total Asset Turnover Revenue Growth Cash-to-Cash Cycle Time Working Capital Inventory Turnover GMROII Total Asset Turnover Revenue Growth Gross Margin B U S I N E S S P R O C E S S E S S H A R E H O L D E R V A L U E SHAREHOLDER VALUE GROWTH PROFITABILITY ASSET

EFFICIENCY CASH FLOW BUSINESS

PROCESSES FINANCIALDRIVERS SOURCE STOCK STORE SELL SHIP

SUPPLY CHAIN PLANNING SUPPORT SERVICES

Days Sales Outstanding Gross Margin Total Asset Turnover Revenue Growth EBITDA Supplier Management (Strategic Sourcing) Fleet Management Dispatch Management 3PL / Carrier Management Customer Order Fulfillment Sales Management Pricing Management Marketing Management Warehouse Fulfillment (Inbound) Warehouse Management Inventory Management

Supply Chain Optimization Information Technology Finance Management Human Resource Management

Product Receiving Product Put-Away Product Placement Location Type Location Identification Product Storage Cycle Counting

Sales Force Stratification Mapping Customers and Sales Force Sales Compensation Techniques Customer Stratification Cost-to-Serve Assessment New Customer Identification Pricing Optimization Voice of Customer Market Selection and Target Strategy Fleet Capacity Management Fleet Cost Assessment Routing Optimization Loading Optimization Carrier Selection and Performance Product Picking Order Delivery

New Facility Location Network Optimization Resource and Asset Alignment (Supplier - Inventory - Customer) Service Level Optimization

System Integration Credit Management Change Management Recruitment and Retention Attrition

Total Landed Cost Payment Terms Quality and Flexibility Lead Time and Variability Fill Rate Growth Potential

Data Integrity Invoice Accuracy Past Due Tracking Efficiency Training Effectiveness (Benefit-to-Cost Ratio) Time and Cost-to-Hire Retention Rate Accuracy and Efficiency Space Utilization Item and Location Accuracy Sales Force Mix Customer Mix Cost-to-Serve and Right Price Time-to-Market Qualified Leads Per Marketing Activity Asset Utilization On-Time Delivery Accuracy and Efficiency

Cost of Goods Sold Accounts Payable Inventory Revenue Inventory Revenue Cost of Goods Sold

Accounts Receivable Revenue Marketing Expenses (Payroll, Promotion, Media)

Fixed Assets (Plant, Property, Equipment)

Transportation Expenses Warehouse Payroll Revenue GROWTH PROFITABILITY CASH FLOW

Total Asset Turnover Working Capital Inventory Turnover EBITDA Revenue Growth

Working Capital Days Sales Outstanding Accounts Receivable Turnover EBITDA Revenue Growth ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY GROWTH PROFITABILITY CASH FLOW ASSET EFFICIENCY Supplier Selection Supplier Performance Supplier Stratification Supplier Relationship Right Number of Suppliers

Inventory Stratification What to Forecast? Demand Classification Forecasting Method When to Order? (Reorder Point) How Much to Order? (Order Quantity) Replenishment Policy

Inventory Mix Forecast Accuracy Fill Rate Total Landed Cost

Revenue Warehouse Payroll Warehouse Rent Inventory Write-Off

Total Asset Turnover Revenue Growth EBITDA

Total Asset Turnover EBITDA Revenue Growth

Fixed Assets (Plant, Property, Equipment)

Inventory Operating Expenses (Transportation and Warehouse)

Revenue Inventory Accounts Receivable Additional IT Expenses Bad Debt (Write-Offs)

Hiring and Training Cost Revenue Optimal Network Location Optimal Resource Deployment Optimal Service Level

www.naw.org/crdc

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Optimizing Human Capital Development

The Council for Research on Distributor Best Practices will conduct its next Consortium on

Optimizing Human Capital Development.

Following the very successful

Optimizing

Channel Compensation

and

Optimizing Growth

and

Market Share

consortia, this initiative

will conduct research to develop practical methodologies and tools to optimize recruiting,

training and retaining human capital. A two-day educational session will be developed based

on the resulting knowledge, methodology and tools.

What Is a Research Consortium?

A Research Consortium is a collaboration of multiple companies, associations, universities or government agencies to conduct research with the objective of developing solutions to a problem or challenge com-mon to everyone by pooling their resources for achieving a comcom-mon goal.

Why Join a Research Consortium?

Many times companies cannot afford to invest in some research and development due to high cost and/ or lack of knowledge resources required to conduct the research. Research Consortia are an economical path to low-cost, high-quality research and development that is essential to the growth of companies. Consortia also allow for the sharing of best practices and strategies among the cutting-edge organiza-tions that invest in such efforts.

Who Should Join this Research Consortium?

This Research Consortium will be beneficial to:

• Wholesaler-Distributors, Manufacturers who go to market through Wholesaler-Distributors • Technology Providers who serve Wholesaler-Distributors and Manufacturers.

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Optimizing Human Capital Development

4

What Are the Benefits?

Consortium members will:

have the opportunity to actively participate in groundbreaking research in one of the most crucial and timely challenges facing the industry and receive results, methodology and tools. be able to direct the scope of the research so that the results are actionable and sustainable. have an 18-month head start on competitors in understanding and implementing the new best practices developed in this consortium as well as a far deeper understanding of the best practices from workshops conducted directly with their organizations by the research team. have the opportunity to send up to 5 people from their organizations to one of the

two educational programs delivered at Texas A&M University for no cost other than travel expenses during the 2015 sessions. The educational programs will be scheduled following the conclusion of the research. The educational sessions alone represent a $1 ,000 value.

HOw TO

REGISTER

Ron Schreibman

Executive Director

NAw Institute for Distribution Excellence 1325 G Street, Nw, Suite 1000

washington, DC 20005

Office:(202) 872-0885

Fax:(202) 785-0586

E-mail:[email protected]

web site:http://www.naw.org/crdbp

F. Barry Lawrence, Ph.D.

Program Director,

Industrial Distribution Program,

Director, Global Supply Chain Laboratory 3367 TAMU, Texas A&M University, College Station, TX 77843-3367

Office:(979) 845-4984

Fax:(979) 845-4980

E-mail:[email protected]

web site: http://id.tamu.edu

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Value to Members

• Distributors and manufacturers will gain competitive advantage by implementing the scientific Optimizing Human Capital Development methods and using the tools developed to maximize value propositions.

• Technology companies will gain the knowledge base, methods and tools that can be implemented in their systems.

Deliverables

In addition to the body of knowledge resulting from this research, consortium members will receive the following tangible outcomes:

• An implementation strategy, tools and methodologies for member firms to optimize their human capital development, specific to each company, based on workshops conducted with their teams

• A one-day workshop at Texas A&M

• A two-day educational seminar aimed at providing firms with knowledge about how they can apply the concepts, tools and techniques identified in the research

• 5 free seats in the educational program that follows.

Consortium Structure and Fees

The membership fee is $25,000 per company in this consortium. The fee will cover attendance in con-sortium meetings hosted by the Global Supply Chain Laboratory at Texas A&M University and workshops with member firms to design the research solutions personalized to their needs.

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Optimizing Human

Capital Development

Achieving Distribution Competitive Advantage through People:

Best Practices in Acquiring, Developing, Managing and Retaining Talent

Wholesaler-distributors often struggle with recruiting, developing and retaining sales talent. They also experience challenges with developing a leadership pipeline for growth and succession. Successful distributors understand the importance of acquiring, developing, motivating and retaining talented employees, but often struggle to develop and implement successful programs. Texas A&M University has developed a consortium in alliance with the NAW Institute for Distribution Excellence that will investigate how distributors can optimize their human resources. The consortium will explore the following issues:

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Optimizing Human

Capital Development

Achieving Distribution Competitive Advantage through People:

Best Practices in Acquiring, Developing, Managing and Retaining Talent

The speed at which most distribution firms can grow (profitably) doesn’t solely depend on the

distributor’s geographic reach, physical assets, product selection, access to capital or innovative

services. It depends on its human resources. Human resources are the most significant factor

in distributor success. Not on the balance sheet and only listed on the profit and loss statement

as an expense, the value of human resources within a company is often underestimated.

Distributors have expended tremendous energy in optimizing operations with information

technology, facility development, inventory control, transportation management, and so forth.

Human resources are often left behind due to a lack of resources for training, a poor

understanding of the return-on-investment (ROI) for human resources development, and

the perception that people are more expendable than other assets within the business.

Organizational Planning and Development

• Translating a distributor’s growth goals to human resources development strategies, plans and policies. Establishing processes to ensure growth is manageable and sustainable.

• Forecasting talent needs and aligning human resources needs with growth strategies.

Human resources are similar to other resources and require strategic planning for deployment. Determining the right number of people and their skill level to meet current and future needs. Quantifying ROI and applying it to hiring and personnel deployment decisions.

• Selecting and implementing change management programs. Culture is a difficult thing to change. People develop opinions about what their firm’s values are and how they serve customers, and will often resist change that threatens their belief systems. Effective change management in distribution environments has not been studied extensively to date. The blend of sales and operations with a heavy customer relationship emphasis makes change more difficult.

• Building the right human resources infrastructure that can adapt to rapidly changing market conditions.

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Schedule

August 2013 – April 2014: Consortium Marketing and Registration

April 11 2014: Consortium Kick-off

March – July 2014: Process Development

April – October 2014: Individual workshops

August – December 2014: Best Practices and Tools Development

January – March 2015: Final Meeting

August – September 2015: Education Sessions

Solutions Approach

Acquiring Talent

• Most distributors are facing a management gap. When baby boomers retire, there will be a shortage of middle management talent at many firms. Finding the right people will require collaboration with universities, and junior and community colleges, and moving away from standardized programs, trades, and competitor’s former employees.

• Attracting top talent by creating a work environment, culture and reputation as one of the best places to work in the industry.

Developing Talent

• Assessing the knowledge, skills and abilities (KSAs) of current employees and anticipating the KSAs needed of future employees. The KSAs change as the organization grows. Models for different size firms and emerging growth plans are needed for rapidly expanding and changing market conditions.

• Developing best practices for how to structure training and learning programs for current and future employees.

• Determining the ROI on education and training. What forms of training have the greatest ROI? How can training be used for retention, innovation and growth?

Retaining Talent

• Motivating and retaining key personnel is optimal. Identifying best practices in compensation, where human resources contribute the greatest value and how to motivate and capture that value.

• Creating career development opportunities that are aligned to strategic goals. Examining how to develop a talent pool matched to marketing strategies.

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Consortium Deliverables

Consortium members will participate directly in the research and gain a better understanding of the findings. The full report will be issued to each consortium member with all analysis performed on the firm itself with the firm’s own data. Direct recommendations will be made for individual participating firms on:

• Developing and using distributor organization development methods and tools

• Creating a human capital development plan, processes and metrics

• Implementing and measuring human capital development interventions, programs and activities

• All tools created to complete the study and analysis for the study

All consortium member company results and data shared with researchers will be kept confidential. Only general findings and best practices will be shared with other consortium members. Distributors will benefit from the research findings and from sharing best practices with other cutting-edge firms in the consortium. Manufacturers will benefit from a shared strategy development study with the distribution community.

Growth goals to HRD strategies, plans & policies

HR Process to ensure growth is manageable & sustainable

Forecasting talent needs

Talent deployment Change management Managing org culture ROI on hiring & deploying HR Agile HR infrastructure

Filling the management gap Developing middle managers

Strategies to recruit from different sources Creating a great work environment, culture & reputation

Assessing knowledge, skills and abilities (KSAs)

Mapping KSAs to operational needs Training & learning programs

Best practices in training

Motivating & retaining key personnel Employee engagement Career development: Career paths, mentoring & development Employee interest alignment

Organizational

Development Organizational Planning Aquiring Talent DevelopingTalent Retaining Talent

Kaplan and Norton’s “The Balanced Scorecard” tied financial metrics to key processes and triggered a great deal of work on internal business processes. Recent studies have worked to tie customer processes to them as well. The challenge to both processes has been the last module: Learning and growth. This process will prove to be the most complicated of all since it involves our greatest resource: People. The consortium will seek to quantify and optimize these critical human resources.

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The field of wholesale distribution continues to experience dramatic change. Distributors have faced challenges in the form of expanding service offerings, pricing pressure, cost controls, and spiraling logistics costs for many years. To address these changes and challenges, the NAW Institute for Distribution Excellence and Texas A&M University’s Industrial Distribution Program in January 2009 launched an alliance dedicated to furthering the under-standing and application of best practices in wholesale distribution. In doing so, the NAW Institute and Texas A&M combine the research and brand power of two well-known organizations serving wholesaler-distributors. Together, the NAW Institute and Texas A&M have formed a new entity—the Council for Research on Distributor Best Practices or CRDBP.

The CRDBP is dedicated to furthering the understanding and application of best practices in wholesale distribution. The mission of the CRDBP is to assist wholesaler-

distributors and their suppliers through creating strategies for competitive advantage.

Leaders in Distribution Research

For more than 50 years, the NAW Institute for Distribution Excellence has conducted cutting-edge research into strategic management issues affecting the wholesale distribution industry. The research is conducted with best practice wholesaler-distributors, and the NAW Institute publishes leading-edge research studies with practical application that it shares with wholesale distribution firms of all sizes and across all lines of trade. As the distribution industry continues to become more competitive, the need for higher levels of research to identify and document new best practices becomes ever greater.

Texas A&M’s Global Supply Chain Laboratory (GSCL) is the nation’s premier distribution research lab. The GSCL brings cutting-edge distribution and supply chain research solutions to the industry. The GSCL provides total solutions for companies by providing research expertise, project execution support, IT implementation assistance, education and training for end users.

About the Council for Research

on Distributor Best Practices

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RESULTS FROM PREVIOUS CONSORTIA

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Ron Schreibman

Executive Director

NAw Institute for Distribution Excellence 1325 G Street, Nw, Suite 1000

washington, DC 20005 Office: (202) 872-0885 Fax: (202) 785-0586

E-mail: [email protected] web site: http://www.naw.org/crdbp

F. Barry Lawrence, Ph.D.

Program Director,

Industrial Distribution Program,

Director, Global Supply Chain Laboratory 3367 TAMU, Texas A&M University, College Station, TX 77843-3367 Office: (979) 845-4984

Fax: (979) 845-4980

E-mail: [email protected] web site: http://id.tamu.edu

For more information about the

Optimizing Human Capital

Development Research Consortium

, contact:

INDUSTRIAL DISTRIBUTION PROGRAM

204 Fermier Hall, 3367 TAMU College Station, TX 77843-3367

PH 979-845-4984 FX 979-845-4980 wEB id.tamu.edu