“30 minutes or your Pizza is free.”

We all know this famous guarantee that drove the meteoric growth of Domino’s Pizza. It addressed a basic unfairness in the pizza delivery market—we’ll deliver to you but your pizza may very well be cold and taste like cardboard by the time you get it. As we said in a previous post on why distributors don’t offer service guarantees, “its not fair.”

The story is a great illustration of why a guarantee is so important, especially from a service, like pizza delivery or shipping supplies.

We usually focus on what the guarantee means for us, the buyer. It gives us confidence, it gives us a remedy if things don’t go as planned, it frees us from having to manage the situation ourselves to ensure everything happens correctly. But a guarantee has an even bigger impact on the one who offers it.

No business would survive long giving away a whole bunch of free pizzas. So in order to survive the provider has to find a way to deliver on the guarantee virtually all of the time.

The guarantee demands of them to have an efficient process, highly capable people and systems and a number of other things so they get it right, so you DON’T have to invoke the guarantee. It also means that if something does go wrong that they will do everything in their power to still meet the expectation of the guarantee, so the customer isn’t impacted.

We all know that things go wrong from time to time, with any business. What we want is that when they do and we need something—like a hot pizza for a pack of ravenous kids—our supplier will do all it can to make it happen. No excuses, no explanations, just what we need.

And it’s even more true for businesses dealing with distributors. Getting the goods we need, when we need them is the sole purpose of using a distributor to get your supplies. But when there are no consequences, or penalties, no guarantee, what’s the incentive for them to build the reliable processes and efficient system to get your products to you, or to pull out all the stops.

It’s not easy to offer a guarantee that you will always have what you need, that’s why its so uncommon to see one.

A distributor who guarantees you will never run out with direct financial payments (even better than a free pizza!) MUST have reliable efficient processes and systems to ensure you have the goods you need. It’s no longer ‘talk’ is ‘do’. The guarantee tells you he will do whatever is needed to recover from every hiccup, so there are no mistakes that affect you. Otherwise he doesn’t have a business.

With a real guarantee, it frees the buyer to devote his energies elsewhere, knowing that the incentives ensure that things will happen as planned. The FDIC guarantees bank deposits up to a certain amount, so people don’t have to run around constantly checking if a bank is safe.

That’s why a guarantee matters, in pizza delivery, with banks, and from your distributor.

To learn more about Shippers Supply’s No-stock-out  penalty guarantee contact us….

Is VMI (Vendor Managed Inventory) a good deal?

Vendor Managed Inventory (VMI) programs have become increasingly popular, but at the same time many businesses take a cautionary approach to them, and with good reason.

Many suppliers offer VMI programs where they will take over the tasks of tracking, counting and placing or suggesting re-order quantities.

They sound good because who wouldn’t want to off load a bunch of administrative tasks to someone else. It frees up time to do more strategic activities which will certainly have a bigger impact on the bottom line.

The problem, and the reason many are cautious, is that they offer to manage your inventory, not to manage it WELL, or to manage the way you would have. In other words the vendor will do all of the administrative tasks, but if something goes wrong and you run out, there are no consequences. Meaning that, you, the client is the one who has to live with the shortages and downtime and unhappy customers.

Some have even found with some more unscrupulous vendors, that their inventory levels have increased beyond what they really need. It’s in the best interest of the vendor to put as little energy into the work as possible to keep costs down. And so that means they often prefer to send large quantities that reduce their freight costs and require them to check on your inventory less frequently.

It’s easy to understand why this is good for the vendor, but it inflates the clients inventory consuming space and cash that could be used elsewhere in the business.

As a result many companies have reported that they spend just as much time monitoring their stocks and managing their vendors as they did before VMI, only to get the same or worse performance.

If you’re going to let a vendor takeover managing your inventory, make sure you get a guarantee that you will never be stocked out, and your inventory won’t get inflated. And make sure it has a penalty to go along with it so it has consequences to ensure the vendor performs the WELL.

Actions, after all, are never as good as results.

To learn about Shippers Supply’s guarantee for managing your inventory, give us a call at 502.634.2800.