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Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Profit Tuning for Wholesale Distributors
Quantum Profit Management(QPM)
Advanced Techniques for Distribution Companies
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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).
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Whale Curves
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Key Management Metrics
• GP: Gross Profit• CTS: Cost-to-Serve• NBC: Net Before Compensation
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Key Management Metrics
Gross Profit (GP)- Cost-to-Serve (CTS)
= Profit (NBC)
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Thinking About Spread
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Gross Profit (GP) Drivers
• Sales Volume• Pricing (Gross Margin %)• Product Mix• Customer Mix
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Cost-to-Serve (CTS) Drivers
• Transaction Counts– orders– picks (invoice lines)– invoices– shipments
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Granular Measurement
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Granular Measurement
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Best Profit Predictor
report from WayPoint Analytics
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
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.• CTS is driven by transaction counts.
(orders / picks / invoices / shipments)
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
NBC Ratios
• Manage NBC+/NBC- ratios everywhere.• Increase gains, reduce losses.• Where important segments drive losses, work
to change ratios.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
NBC+ : NBC-
report from WayPoint Analytics
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
NBC Incentives
• Recognize and remove current incentives that cause people to drive losses.
• Create incentives that pay when people are contributing to company goals.
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
NBC Incentives
report from WayPoint Analytics
Advanced Profit Innovation ConferenceAdvanced Profit Innovation Conference www.APICconference.com
Summary
• Whale Curves• Key Metrics: GP / CTS / NBC• Deltas• Granular Measurement• Best Profit Predictor• NBC Ratios• NBC Incentives