Profit Tuning for Wholesale Distributors Quantum Profit Management

Profit Tuning for Wholesale Distributors Quantum Profit Management (QPM) Advanced Techniques for Distribution Companies Advanced 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 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 Conference www. APICconference. com

Whale Curves Advanced Profit Innovation Conference www. APICconference. com

Key Management Metrics • GP: Gross Profit • CTS: Cost-to-Serve • NBC: Net Before Compensation Advanced Profit Innovation Conference www. APICconference. com

Key Management Metrics Gross Profit (GP) - Cost-to-Serve (CTS) = Profit (NBC) Advanced Profit Innovation Conference www. APICconference. com

Thinking About Spread GP spread CTS Advanced Profit Innovation Conference www. APICconference. com

Gross Profit (GP) Drivers • • Sales Volume Pricing (Gross Margin %) Product Mix Customer Mix Advanced Profit Innovation Conference www. APICconference. com

Cost-to-Serve (CTS) Drivers • Transaction Counts – orders – picks (invoice lines) – invoices – shipments Advanced 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 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 Conference www. APICconference. com

Granular Measurement Advanced 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 Conference www. APICconference. com

Best Profit Predictor report from Way. Point Analytics Advanced 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 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 Conference www. APICconference. com

NBC+ : NBC- report from Way. Point Analytics Advanced 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 Conference www. APICconference. com

NBC Incentives report from Way. Point Analytics Advanced Profit Innovation Conference www. APICconference. com

Summary • • Whale Curves Key Metrics: GP / CTS / NBC Deltas Granular Measurement Best Profit Predictor NBC Ratios NBC Incentives Advanced Profit Innovation Conference www. APICconference. com