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CEO Blog

11/03/2011

Credit Limits: Drop your pants!

For many years now we have been sending our financial figures not only to our banks, but also proactively to all German credit bureaus....

For many years now we have been sending our financial figures not only to our banks, but also proactively to all German credit bureaus. This means that some suppliers (who do not have loan insurance) have access to our figures. I do not have a problem with this - sooner or later the financial framework needs to made public in the Electronic Federal Gazette. And above all: we need a good rating with the banks, insurance companies and suppliers. It is a natural procedure - I wish to take a loan, therefore, I need to "drop my pants" so to speak.

This awareness has not yet sunk in with some customers. We have been working with the German Factoring Bank for more than a decade now, and they are very generous with our credit limits. We owe this to the credit agency, and of course, to our financial figures. If this does not work, we ask our customers to send their current figures directly to the Factoring Bank, resulting in establisment of a credit limit. But unfortunately you often hear "I won't give my figures to a foreign bank". I believe this idea belongs in the Stone Age. You also often hear "But your competitor XX gives us XX credit." Ok, even then customers should be interested in having 2 credit limits with 2 suppliers, as this would be an advantage during delivery bottlenecks.

As is often the case, non-transparent companies have other problems. If we take on the credit risk of a couple thousand euros and ask them to "Please pay three times within the credit period, and at the very latest then you will receive a limit from the Factoring Bank." it still mostly does not work. As a last measure we have acted as a guarantor with a loan guarantee via the General Manager. Up to now the people who have refused to sign are the ones who previously said "My company cannot go broke, because. . . " even though they do not really believe their own words.

Oh, by the way: We do not even need the financial figures for ourselves; just for the bank, which then has to declare them secretive. Our experience has been: credit yes or no, and clarify further questions directly with the customer. Even then we only do this with customers who have a poor credit rating, or who are asking for a particularly high loan. Customers with poor credit ratings usually already know they have one. I can only advise: Do as much as you can to make sure that your credit rating with credit agencies are as good as possible.

06/03/2011

The Perversion of Outsourcing

I do not like outsourcing: We program our software ourselves (a real USP!), our technicians do not sit in India, we handle our own bookkeeping, we have our own...

I do not like outsourcing: We program our software ourselves (a real USP!), our technicians do not sit in India, we handle our own bookkeeping, we have our own marketing team (including product photo studio) and translation office, and of course, our own logistics. One of our large competitors has been outsourcing his warehouse for a long time. I ask myself how that can be a good thing.

We are of the opinion that a distributor's warehouse and logistics show his strengths. Sixty percent of our delivery process is handled automatically. For the remaining 40% logos have to be adhered to the devices, non-standardized serial numbers need to be put on, or perhaps a customer-specific packaging tape will be used. We also often use our customers' printed shipping boxes, or slip their advertising materials in. This is all done in small quantities, so that it hardly works in a 1,000 man warehouse. Independent of that, it is important to have an on-site warehouse, so that a technician or salesperson can have a quick look at something.

Add to this mix the fact that Jarltech also has a small but nice truck fleet. DPD is a very reliable shipping partner. Despite this it sometimes happens that their last truck is full at the precisely calculated cut-off time of 7PM. So, either we have to send another truck after it, or also fulfill the 4-hour delivery service within a radius of 250 km.

Another example is palette goods shipment. We have tried this with many shipping companies. Unfortunately the prices here have been driven into the ground so much to the point that quality is suffering. Palettes with printers on them are left standing in the rain, ink cartridges are freezing, goods are being delivered incorrectly, or are needed within 5 days somewhere in Germany. Sure, a palette like this costs about 40 euros and will be loaded and unloaded about 5 times. But if we do this ourselves, then the palette costs around 100 euros. . .but since we started with our own trucks 5 years ago, we have never ever had an incorrect delivery, or receipt paper left standing in the rain. And we have never had a palette tip over while unloading it.

To comment on the topic "Outsourcing Core Strengths": A large, well-to-do manufacturer in our segment recently sought the help of a well-known corporate consultant to plan new business areas for them. What? What is the job of their Top Management? Can you simply outsource future corporate strategies? And if it does not work, do you then fire the consultant? For a corporation this is the perversion of commercial trade.

02/03/2011

Everything iPad

One very noticable thing at the EuroShop is that every second POS manufacturer has a touchscreen checkout, which looks like an iPad (or rather, has used some of its...

One very noticable thing at the EuroShop is that every second POS manufacturer has a touchscreen checkout, which looks like an iPad (or rather, has used some of its design elements). The manufacturers who do not openly show an iPad checkout have top secret developments going on in the back room, which basically looks like a puffed up iPad. Ok, sure, they are trying to excite customers with its shape and navigation via multi-touch gestures on the screen, which does not really work.

Anyone who is really into multi-touch though can find something of interest at the EuroShop: at least every fifth presenter is offering games of chance for the exhibition visitors to win prizes like Apple tablets. By the way, these devices look an awful lot like the new POS systems. . . :)

26/02/2011

Thoughts about the CeBIT

We sure were proud the day we had our first booth at the CeBIT. In Hall 19 we had a 20 sqm black booth. It must have been either 1991 or 1992....

We sure were proud the day we had our first booth at the CeBIT. In Hall 19 we had a 20 sqm black booth. It must have been either 1991 or 1992. It was amazing to present a CCD Scanner with keyboard wedge, amongst the incessant beeping barcode readers. At some point we had worked our way up to 250 sqm on two levels in Hall 1. After the exhibition was finished the booths were not dismantled - this exhibition hall was exclusively for the CeBIT (and except for the 10 days out of the year when the exhibition was held, only mice and rats lived there). The booths belonged to the exhibiting companies; in addition we had meeting pavillons on the roof of Hall 1, including entry into the land register. What a strange feeling it was at the time: the CeBIT. Lufthansa flew fully booked 747s from Frankfurt to Hannover, train reservations had to be made a half a year in advance. . .do you remember? In 2000 we sold our booth, and at a good time too. The CeBIT had a record-breaking year in 2001, but since then, the exhibition has basically been reduced by half. You never would have dreamed it possible amidst the ecstasy and alcohol poisoning.

A hotel room was unthinkable, unless of course, you wanted to spend the night in Braunschweig or Kassel. So our only option were privately rented rooms in and around Laatzen, where we dragged ourselves back to abandoned kids‘ rooms for 10 days. Sometimes we were robbed: the private rooms were all paid for in cash, which the thieves knew, and some renters did not think much of banks.

I also looked into the HRS: now I can book a hotel room near the exhibition at a fair price. And Lufthansa is flying again to Hannover, this time with smaller planes (and they have lots of seats available).

In our segment, EuroShop is purposefully going after the CeBIT, by having the exhibition dates overlap. Düsseldorf is completely sold out, and there are no hotels near the exhibition available for less than 550 euro per night. All that remains is the memory of a nice CeBIT decade, where everything increased and expanded, and the parties were more expensive and lasted longer.

One day I will go the CeBIT, that will do for 2011.

24/02/2011

Taxes in Hong Kong and the thanks of the German welfare recipients

In Hong Kong yesterday, the Finance Minister held a press conference about what the government is doing with its surplus. Yes, you heard correctly: surplus!...

In Hong Kong yesterday, the Finance Minister held a press conference about what the government is doing with its surplus. Yes, you heard correctly: surplus! Hong Kong is earning money. They have a reserve of about 60 billion euro, and last year alone they made a plus of seven billion euro. And it is hard to believe (after all, we are not in Europe) that the money is not being senselessly spent. Actually, the taxpayers are receiving refunds, even though no one here pays more than 16.5% in taxes (15% for companies).

Despite this, the middle class is complaining that this year they will not be receiving a check (as in previous years). The money will be deposited into a general pension fund (cash payments would only make inflation worse), and social housing occupants will receive two months rent free. The personal allowance for families with children and dependent senior citizens is also increasing.

But what is even more surprising is that you can ask anyone on the street what is happening with their tax money. The government does not audit itself, so it has ordered a financial auditor together with the KPMG. The resulting report about the distribution or investment of the suplus does not get submitted to the government, but rather, to each individual taxpayer. The report is also critical about, among other things, the sustainability of the fight against inflation.

I wish that there would be more discussion in Germany about such things, especially about how the money from taxpayers is transferred to non-taxpayers. Thanks to the low tax rates in Hong Kong, it is perfectly normal for a well-off citizen to donate his tax refund to charity; whether it is a charity ball, a normal donation or a truffle special, as long as the money finds its way to those in need, it does not matter how. And these people say thank you too. I cannot ever remember that the Association for Social Welfare (if that even exists) has ever said thank you to the many workers, employees and companies which have worked so hard to make these transfers possible. Taxpayers can be proud to be able to finance such a generous social system. This social peace is the most important point in Germany's future; otherwise the money goes into foreign countries and everything else will fall apart. Besides, "social peace" should not always mean that funding agencies pay so that the needy stay quiet - a little more interest should come from both sides. I always say thank you when someone gives me something, and never "Is that all?".

18/02/2011

Why AIDC/POS manufacturers should stay far away from broadline distribution, and what smart retailers get out of it

Up to now our manufacturers have focused on special distributors like us....

Up to now our manufacturers have focused on special distributors like us. And I thought they understood why this makes sense, and was generated for the entire Channel Value. Unfortunately now I have doubts. When some manufacturers flirt with IT distributors they risk tearing apart what was previously painstakingly put together.

Up to now the manufacturers decided which products they wanted to bring onto the market. The retailer and the end customer then decide whether the product is a success or not. And the manufacturers would like to continue this way.

Unfortunately, the trend shows that increasingly more of our manufacturers are pondering marketing their devices via IT distributors too. Man is that short-sighted! Then the controllers of the IT distributors would decide if the product is available or not.

We deal with the fact that we are shlepping around roughly 60 days worth of stock with us. From a business perspective, this does not make sense when you first hear it. But we see it as our duty to also have "rare" articles on stock, so that our retailers do not need warehouses. The 60 days are an average value anyway. Those who are quick on the ball only need 20 days; on the contrary, some special products only once a year. In large distribution such things are rigorously rejected. For example, if barcode scanner A is not successful, then it will no longer be part of the program. If a customer needs scanner A though, and sees it is no longer available, then he will automatically choose scanner B. And just like that, product A goes from being a slow-moving item to being a dead item.

Of course the IT distributors are putting on the pressure. So what is the logical reaction of the special distributors? Since we also live off profit, we will also give priority to devices made by other manufacturers - it is a simple matter of survival. And just like that, you trip up a manufacturer. Then he notices that a large IT distributor, with millions of products and hundreds of manufacturers cannot be forced to make recommendations - they only distribute goods. This means he can never actively find new business for the manufacturers.

There is nothing left for the manufacturers to do but establish their own distribution and hire business development managers to do the job of the special distributors. Since most IT distributors cannot afford sound telephone support, they will also need a support call center. They also have no interest in repairing devices themselves, so they also need a repair service.

Since slow-moving products are not selling well (due to long delivery times), producers are suddenly forced to establish regional warehouses out of self-preservation, in order to quickly supply distributors, since only fast-moving products are stored.

Then it is clear to the manufacturer: rats! I do not actually need distributors, because I could also ship packages. The IT distribution has such a large percentage of sales (because the specialists have lost interest) that no manufacturer trusts itself to break the cycle. We are not only talking about whether or not it makes sense, but also the manufacturing sales manager's bonus. Even if it makes sense, he would never risk the fact that this decision could result in sales being delayed a month, because he would be losing his bonus.

This all may sound shocking. If you go into detail, there are many more issues as to why manufacturers should be careful. Among other reasons our retailers are selling these special products because there is a higher margin to be earned than on a hard drive. That is why the retailers have no interest whatsoever that our products become commodities, and quickly appear on cheap online shops thanks to XML feeds. They partially do not know that selling something, though lacking recommedation, also destroys the price.

The consequences are really bad for manufacturers: many smart retailers revamp their solutions immediately to other products, as soon as the margin appears by a broadliner. It is way too simple for the end consumer to compare prices and then select a device which is not available everywhere. Conclusion: please think long-term, just as we businesses do, and do not only live from quarter to quarter.

17/02/2011

The Chinese government. . .

. . .often acts very smartly during economic issues. The Financial Times reported today that now stock options in Yuan is allowed....

. . .often acts very smartly during economic issues. The Financial Times reported today that now stock options in Yuan is allowed. But: only for banks and businesses, and speculation is forbidden. :) It has been awhile since I had such a good laugh, but let us first see how long the banks adhere to the rules. . .

16/02/2011

Life After Death by PowerPoint (Version 2011)

Here is a good laugh: Since I recently got really upset about excessive PowerPoint usage I found the perfect link:

Here is a good laugh: Since I recently got really upset about excessive PowerPoint usage I found the perfect link: http://www.schooltube.com/video/99aa088b6b5ee5ac24b5/Life-After-Death-PowerPoint

In case the link is too slow, here is the video from a Chinese server (with a few seconds of a KFC China commercial): http://v.youku.com/v_show/id_XMjIzNjI3NTQw.html

Enjoy!

14/02/2011

The sense and absurdity of manufacturer events

Most of our manufacturers, especially the American ones, invite us to events two to three times a year....

Most of our manufacturers, especially the American ones, invite us to events two to three times a year. I do admit, the manufacturers really do try hard, but unfortunately these events are apparently as inefficient as possible: a one-day session, but arriving one day earlier at lunchtime, and departing the day after the session and the meeting "roundup ". Instead of holding something like this in a practical airport hotel, the event always seems to be located at least 100 km away from the airport, or in a place that you can only reach by transferring three times.

Other nice things are the "team building" and "marketing networking". First: my competition and I are not a team, and we never will be. And "marketing networking" among competitors is not only forbidden, but also stupid. Of course there are "free time blocks": sailing, high rope course, car racing, etc. These things are meant well, but I would rather spend my free time with my family. If I would attend all 50 manufacturer events in 2011, I would never be in the office, thanks to arrival and departure days. But, which manufacturers do you turn down? They are then insulted, or the account manager gets in trouble with his boss, because he cannot "control" his distributors.

I now do it so that I arrive the morning of the session, and depart immediately afterwards. Of course I would be interested in meeting the manufacturing boss and learning about his corporate strategies. But, I give you my word, as soon as anyone starts showing me products specs via PowerPoint presentation, I stand up and leave. The other participants continue sitting there, glued to their Blackberries, usually the manufacturer's employees.

Is it polite to simply stand up and leave? Maybe not, but on the other hand, maybe customers should be treated differently.

I often hear: "Send over an employee". Ok, a) sometimes the manufacturers really want to see the boss, and b) we only hire employees who we need. If we did not have anything to do, then we would simply create PowerPoint presentations: the day goes by quickly, and you can sleep well.