The article states, “One of the realities of management information systems is that they only express what actually happened. In many instances, it is important to understand the financial and operating impact of what didn't happen. This is especially important with regard to missed sales opportunities.”
Bates then outlines the support for his premise that incremental sales—that is, selling more to current customers—have little positive impact on profitability. “The assumption that adding new customers doesn't increase costs because ‘the truck is going right by there anyway’ always proves inaccurate in the harsh realization that expenses are incurred on every sale,” he says.
Bates also argues that, in down times, “Many of the actions firms take to diminish the burden of the recession end up lowering sales,” specifically referring to inventory decreases, accounts receivable reductions and lags in add-on selling. “Sometimes, not doing things that hurt is as important as doing things that help,” he adds.
To learn more, read “The Cost Of Goods Not Sold” in the Spring 2010 issue of The MHEDA Journal Online at www.TheMhedaJournal.org. The print magazine is mailed out to subscribers in January, April, July and October. The most recent issue was published on April 15.
For more information, contact Chris Powers, editor of The MHEDA Journal, (315) 445-2347, e-mail: chris@datakey.org.
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About MHEDA
Founded in 1954, the Material Handling Equipment Distributors Association (MHEDA) is the premier source for manufacturing knowledge, education and networking. Through its member journals (www.TheMhedaJournal.org)
