What Causes Profitability?

August 12, 2014
/   Spotlight

Digital Insight proves that digital bankers actually drive increase engagement and profitability with their financial institution.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Cause and Effect: If you build it, will they come?

/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Platform Shift in the Making

February 13, 2013
/   Insights

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already). Consider...

Infographic: How to Spot a Fake Check

March 8, 2013
/   Insights

The team over at TROY pulled together an infographic on how to spot a fraudulent check. With more consumers using remote deposit capture to upload and deposit checks through their smartphones, it’s important to...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Reserve Banking: The New Radical Idea

June 5, 2014
/   Insights

Banking is by nature a very conservative industry. That’s why the current buzz over ‘reserve banking’ is so interesting. Even the term seems innocuous, but the scenario it proposes is nothing short of revolutionary....

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Editor’s Note: Gene Marks is a small business management columnist, author, and speaker who also owns and operates The Marks Group PC, a highly successful 10-person firm that provides technology and consulting services to small and medium sized businesses. The Marks Group PC, launched in 2004, has grown to help more than 500 companies and more than 2,000 individuals throughout the country. Gene writes weekly online columns for The New York Times and Forbes, as well as monthly and bi-weekly columns for Bloomberg Business Week and American City Business Journals. Intuit has, on several occasions, contracted Gene to provide marketing-related services.

“But I need to carry these items,” Sam whined to me one day. “What if a customer called and I didn’t have it in stock?”

Do you have customers who are distributors? Fine, then it’s their business to carry inventory. They’re the middle man. Inventory is their life. They’re being paid to make sure stuff is in stock so the manufacturer doesn’t have to.

But wait, you have customers who are not distributors? They manufacture? They provide services? Then you, as their banker, should say to this them: “What the HELL are you doing with extra inventory in your shop? Shame on you!”

Sam sells and services fire protection systems to restaurants and retail customers. He’s got inventory lying around all over the place. He’s got a warehouse with spare parts stacked up to the ceiling. He’s got a dozen trucks on the road with parts stuck in every crevice. Some of his techs keep materials in their own homes.

This surplus inventory is sucking out the cash. He’s leasing more warehouse space than he needs. He’s incurring utilities and other additional overhead costs. He’s losing production administering and accounting for missing parts. And he’s missing parts. Fifty bucks here, 50 bucks there. Sam’s company tosses out thousands of dollars each year on inventory mismanagement. It costs Sam MORE money just to keep a lot of this inventory then not.

“But,” he tells you, “what if a customer called and he didn’t have it in stock?”

Well, that depends on the customer! Sam wants to make sure he has stuff in-house so that if ANY customer calls he can get a replacement part right out to them. It’s not a great idea. If the customer is a high dollar, high turnover account then carrying inventory especially for them would make sense. But if it’s not, then other arrangements have to be made.

Tell him to dump that inventory. Sell it back to the manufacturer. Scrap it. Set it on fire. Whatever, just reduce it. Re-negotiate your lease for less space. Put a ping pong table in that newly created area so your people can have some fun on their lunch break. Or build a room there and move in your teenage son. There are a lot of great things you can do once you’ve relieved yourself of excess inventory.

It’s your job to help Sam re-think how he is servicing some of his customers. Can most parts be over-nighted from the manufacturer? If it’s going to be less expensive to pay that shipping cost, should he then carry the part in-house? Are the parts truly mission critical? Can they wait a day or two? Will Sam lose a significant amount of business because it takes an extra day to get that part in? Or is he losing more money on that account by keeping the part in stock?

By Gene Marks

(362)

Insights

Banking.com’s perspective on industry news and trends

(201)

Spotlight

Must-read news and insights from financial industry leaders

(86)

Voices

Compelling voices and contributed content from around the web

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.