Advanced Profit Innovation Conference Profit Tuning for Wholesale Distributors Quantum Profit...

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Profit Tuning for Wholesale Distributors

Quantum Profit Management(QPM)

Advanced Techniques for Distribution Companies


Why?

• QPM is the most effective way to manage a business for profitability.

• QPM keeps you focused on what really matters.

• QPM helps everyone pull together for real results.


Whale Curves

• You have to understand whale curves if you want to understand the way your business really generates profits.

• You have to understand whale curves if you want to understand your profit potential.

• You have to understand whale curves if you want to know your vulnerabilities (and those of your competitors).


Whale Curves


Key Management Metrics

• GP: Gross Profit• CTS: Cost-to-Serve• NBC: Net Before Compensation


Key Management Metrics

Gross Profit (GP)- Cost-to-Serve (CTS)

= Profit (NBC)


Thinking About Spread


Gross Profit (GP) Drivers

• Sales Volume• Pricing (Gross Margin %)• Product Mix• Customer Mix


Cost-to-Serve (CTS) Drivers

• Transaction Counts– orders– picks (invoice lines)– invoices– shipments


Deltas

• Your basic job is to create a difference (or delta).

• Positive and negative deltas sum to make your performance.

• Managing the deltas gives you direct control over your results.


Granular Measurement

• Don’t draw conclusions from averages – dig into the numbers to find out what they’re made of.

• Look at service models at the granular level.


Granular Measurement


Best Profit Predictor

• CTS (cost-to-serve) per revenue dollar is the best predictor of profitability.

• CTS% will have a broad variability across the company.

• CTS% vs GM% directly reports profitability.



report from WayPoint Analytics



• CTS (cost-to-serve) per revenue dollar is the best predictor of profitability.

• CTS% will have a broad variability across the company.

• CTS% vs GM% directly reports profitability.• CTS is driven by transaction counts.

(orders / picks / invoices / shipments)


NBC Ratios

• Manage NBC+/NBC- ratios everywhere.• Increase gains, reduce losses.• Where important segments drive losses, work

to change ratios.


NBC+ : NBC-



NBC Incentives

• Recognize and remove current incentives that cause people to drive losses.

• Create incentives that pay when people are contributing to company goals.


NBC Incentives



Summary

• Whale Curves• Key Metrics: GP / CTS / NBC• Deltas• Granular Measurement• Best Profit Predictor• NBC Ratios• NBC Incentives

Advanced Profit Innovation Conference Profit Tuning for Wholesale Distributors Quantum Profit...

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