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Beyond Surviving Optimizing Profitability. M&A Activity in Wholesale Distribution. * Excludes transactions in the retail consumer markets Source: Pembroke Consulting. Distribution Trends – EBITDA Multiples. 2007. 2005. 2006. 2004. Source: MDM, Vol38, No. 4, February 25, 2008.

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Beyond Surviving Optimizing Profitability

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Beyond surviving optimizing profitability

Beyond Surviving

Optimizing Profitability


M a activity in wholesale distribution

M&A Activity in Wholesale Distribution

* Excludes transactions in the retail consumer markets

Source: Pembroke Consulting


Distribution trends ebitda multiples

Distribution Trends – EBITDA Multiples

2007

2005

2006

2004

Source: MDM, Vol38, No. 4, February 25, 2008


Top 10 public distribution firms by roic

Top 10 Public Distribution Firms By ROIC%

Source: MDM, Vol38, No. 4, February 25, 2008


The roi equation

The ROI Equation

Financial Statements  “Balance Sheet” &“Income Statement” encapsulate the results of the above activities


Distribution business process framework

DistributionBusiness Process Framework


Educational session deliverables

Educational Session Deliverables


Business process framework

Supply Chain Planning

Key Performance Indicators (KPIs)

Business Process Framework

Supplier

Customer


Business process groups summary

Business Process Groups – Summary


Financial framework

Financial Framework


Financial drivers

Financial Drivers


Optimizing distributor profitability methodology

Optimizing Distributor ProfitabilityMethodology


Optimizing distributor profitability methodology1

Optimizing Distributor Profitability – Methodology


Performance assessment

Performance Assessment


Best practices framework

Best Practices Framework

Best Practices

Good Practices

Performance

Common Practices

Time


Process assessment

Process Assessment


Custom process assessment report sample

Custom Process Assessment Report – Sample


Process assessment workbook applications

Process Assessment Workbook – Applications

  • Workbook can be used to

    • Assess other branches / regions, hence set company-wide process benchmarking

    • Assess acquisition targets’ process potential

  • Custom report identifies process and financial gaps


Cross channel financial benchmarking

Cross-Channel Financial Benchmarking


Cross channel financial benchmarking report

Cross-channel Financial Benchmarking Report


Optimizing distributor profitability methodology2

Optimizing Distributor Profitability – Methodology


Connecting processes and shareholder value

Connecting Processes and Shareholder Value

$hareholder Value


Distributor profitability framework concept

Distributor Profitability Framework – Concept


Distributor profitability framework

Distributor Profitability Framework


Optimizing distributor profitability methodology3

Optimizing Distributor Profitability – Methodology


Source group analyzer schematic diagram

Source Group Analyzer – Schematic Diagram


Optimizing distributor profitability methodology4

Optimizing Distributor Profitability – Methodology


Best practices roadmap sample

Best Practices Roadmap – Sample


Best practices roadmap sample1

Best Practices Roadmap – Sample


Optimizing distributor profitability methodology5

Optimizing Distributor Profitability – Methodology


Balanced score card kaplan norton

Balanced Score Card (Kaplan & Norton)


Linking implementation components

Linking Implementation Components


Implementation complexity vs decision making

Implementation – Complexity vs. Decision-making

  • Low ROI

  • Low Level of Acceptance

  • High ROI

Complex Models

  • High ROI

  • Need Training

  • Low ROI

  • Lack of Local Knowledge

Simple Models

Majority of distributors

De-centralized Decision-Making

Centralized Decision-Making

Everything should be made as simple as possible, but not one bit simpler

- Albert Einstein


Beyond surviving optimizing profitability

Supply Chain Planning

Support Services

ODP Methodology

IDENTIFY GAP

MAP SHAREHOLDER VALUE

ASSESS PROFITABILITY

UNDERSTAND BEST PRACTICES

ENABLE & IMPLEMENT

Process Framework


Source supplier management supplier stratification

Source – Supplier Management – Supplier Stratification

Best Practices

Good Practices

  • Loyalty, Profitability, Services, Performance

  • Risk/Exposure – supply availability, technical requirements, financial factors, technological factors and environmental issues

  • Landed Cost (TCO)

  • Combination Methodology

  • Segmentation based on COGS by supplier

  • Pareto framework (80%-20%)

Performance

Common Practices

  • Purchase price variance

  • Landed cost

  • Lacks segmentation framework

Time


Supplier stratification

Supplier Stratification


Beyond surviving optimizing profitability

Supply Chain Planning

Support Services

ODP Methodology

IDENTIFY GAP

MAP SHAREHOLDER VALUE

ASSESS PROFITABILITY

UNDERSTAND BEST PRACTICES

ENABLE & IMPLEMENT

Process Framework


Linking source processes to shareholder value

Linking SOURCE Processes to Shareholder Value

Process Group

Process

Process Metric

Financial Elements

Financial Metrics


Beyond surviving optimizing profitability

Supply Chain Planning

Support Services

ODP Methodology

IDENTIFY GAP

MAP SHAREHOLDER VALUE

ASSESS PROFITABILITY

UNDERSTAND BEST PRACTICES

ENABLE & IMPLEMENT

Process Framework


Source analyzer lt lt variability schematic diagram

Source Analyzer – LT & LT Variability – Schematic Diagram

Basic Input Parameters

Additional Revenue

EBITDA

Lead Time

LT Var

Expected Turns

P&L and

Bal. Sheet

Safety

Stock

% of re-investment

RONA

GMROII

Turns

YES

Re-invest ?

Average Inventory

NO


Source group analyzer on time delivery

Source Group Analyzer – On-Time Delivery


Potential profitability olympic distribution

Potential Profitability – Olympic Distribution


Potential profitability olympic distribution1

Potential Profitability – Olympic Distribution


Potential profitability olympic distribution2

Potential Profitability – Olympic Distribution


Beyond surviving optimizing profitability

Supply Chain Planning

Support Services

ODP Methodology

IDENTIFY GAP

MAP SHAREHOLDER VALUE

ASSESS PROFITABILITY

UNDERSTAND BEST PRACTICES

ENABLE & IMPLEMENT

Process Framework


Sell sales management customer stratification

Sell – Sales Management – Customer Stratification

Best Practices

Good Practices

  • Based on multiple factors – CTS, Business Potential, Relationship, Customer Lifetime Value, Net Profit, Loyalty

  • Combination methodology

  • Based on single factor – Sales, Gross Margin, Business Potential

Performance

Common Practices

  • No customer stratification

  • Customer groups based on – Market Type or Product Line

  • Top customers based on revenue

Time


Customer relationships

Customer Relationships


Sell pricing management pricing methods

Sell – Pricing Management – Pricing Methods

Best Practices

Good Practices

  • Pricing Optimization

  • Pricing matrix based – Customer Stratification, Seller’s Item Visibility, Buyer’s Item Visibility and Cost Levels & Margin Levels

  • Pricing Rules / Heuristics

  • Value based pricing

  • Pricing matrix based on customer stratification and seller’s item visibility

Performance

Common Practices

  • Cost Plus Pricing

  • Cost Plus Driven Matrix Pricing

  • List Price or List-Less Pricing

Time


Potential profitability olympic distribution3

Potential Profitability – Olympic Distribution


Beyond surviving optimizing profitability

SELL

Real World Example


Real world implementation results

Real World Implementation Results


Process assessment survey summary

Process Assessment Survey Summary


Business process assessment survey summary

Business Process Assessment Survey – Summary

62%


Potential profitability

Potential Profitability


Potential profitability ebitda olympic distribution

Potential Profitability (EBITDA) – Olympic Distribution


Potential profitability rona olympic distribution

Potential Profitability (RONA) – Olympic Distribution


Conclusion

Conclusion

Actionable Learnings


Optimizing distributor profitability methodology6

Optimizing Distributor Profitability – Methodology


Conclusion1

Conclusion

  • POTENTIAL for improving profitability exists

  • Process and financial performance can be MEASURED to assess potential

  • A ONE-to-ONE connection can always be established between business processes and shareholder value

  • This connection can be QUANTIFIED and PRIORITIZED

  • Best practices can be ACHIEVED

  • Education will ENABLE distributors to realize POTENTIAL profitability


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