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Quantum Profit Management. presented by Merrifield Consulting WayPoint Analytics. R  R. Introductions. Bruce Merrifield Corporate CEO performance strategist distribution turnaround specialist in 150+ channels Randy MacLean Corporate CEO performance analyst

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Quantum profit management

Quantum Profit Management

presented byMerrifield ConsultingWayPoint Analytics

RR


Introductions
Introductions

  • Bruce Merrifield

    • Corporate CEO

    • performance strategist

    • distribution turnaround specialist in 150+ channels

  • Randy MacLean

    • Corporate CEO

    • performance analyst

    • consulting and analysis for Fortune 100

RR




New opportunities

Yes Virginia, there is a Santa Claus!

New opportunities!

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Realities
Realities

  • Can’t sell your way out

  • Yesterday’s tactics aren’t working

  • “Try harder” is not a solution

  • You aren’t different if you’re doing the same things

  • Need new metrics to manage transfomationally

RR


Unique time in history
Unique Time in History

  • Dawning of a New Age

  • “Great” Recessions = Great Opportunity

    • occur once in a generation

    • force lean and optimal operation

    • clear out weak competitors & capacity

    • opportunity for “virtual acquisitions”

    • recovery brings high margins and growth

    • rewards courage and boldness

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New technologies
New Technologies

  • Technological advances bring paradigm shifts

    • once in a generation

    • computing horsepower brings new capabilities

    • Revenue  Gross Profit  Granular Net Profit

    • early adopters get competitive advantage(others are slow to catch on)

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Quantum profit management1

the new paradigm

Quantum Profit Management

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Qpm defined
QPM: defined

  • Quantum Profit Management

    • “quantum” – from physics – the smallest indivisible unit of matter

    • to manage by breaking the business down into segments and bringing each to profitability

    • ensuring every segment has a profitable service model

    • engage the whole organization in QPM process

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Qpm stages together
QPM Stages (Together)

  • “Renew the Core” (today)

    • 5 + 15 + 1 = 21% customers  250% profits

    • re-think sales force + small customers/orders

  • Sustain and Extend Premium Profits

    • engagement #s  service #s  profits

    • at every branch! (?)

  • Adapt and Proact with Environment

    • whale program complexity; supply-chain shifts;

    • side-step economies of scale; infinite bandwidth

BR


Qpm principles
QPM Principles

  • You're making more money than you know.

  • Measure and evaluate at the quantum level.

  • Manage on net profit.

  • Manage the deltas.

  • Financial averages mask what's really going on.

  • Understand and manage service models.

  • Identify and stop non-strategic cross-subsidies.

  • Synchronize goals & incentives.

RR


Cost to serve defined
Cost-to-Serve: defined

  • Cost-to-Serve (CTS)

    • everything on the P&L between GP and Net

    • total cost to deliver goods & services to clients

    • GP – CTS = Net Profit (de-averaged)

    • need CTS on granular business (NO averages)

  • Infuse your organization with CTS thinking

    • train everyone to be CTS-conscious

    • look for CTS improvements in everything (recognition incentives)

    • always include CTS in process planning

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Key principles

what you really need to know

KEY principles

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Customer profitability ranking report
Customer Profitability Ranking Report

  • customer selection is key to top performance

  • instantly shows priority areas for action

  • requires accurate CTS / costing

  • charting technique: whale curve

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Customer profitability ranking
Customer Profitability Ranking

(screen from WayPoint Analytics)

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You re making more than you know
You’re Making More Than You Know

penetrate

transform

(screen from WayPoint Analytics)

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Make money on everything you do
Make Money on Everything You Do

  • Segment the business

  • Analyze closely using Net / PBIT

  • CTS must be less than GP

  • Have (different, appropriate & profitable ) Service Models for every segment

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Gross margin is a poor metric
Gross Margin (%) is a Poor Metric

(screen from WayPoint Analytics)

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Gross margin is a poormetric
Gross Margin is a PoorMetric

  • Net profit rarely correlates to GP%

  • GP% doesn’t account for CTS variance

  • GP incentives drive dysfunction:

    • GP% mirage

    • management vs sales reps

    • work against your true objectives

    • consume management time and energy

  • Drive poor decision-making

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Manage on net profit
Manage on Net Profit

  • Direct link to real profits

  • Direct link to positive cash flow

  • Pay down debt

  • Produces return for shareholders

  • Top management incentives

  • Synchronize sales incentives

    • deltas are powerful tools for improvement

  • It’s all that matters

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Financial averages mask reality
Financial Averages Mask Reality

(screen from WayPoint Analytics)

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Manage the extremes
Manage The Extremes

Core Business

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Customer profitability ranking1
Customer Profitability Ranking

(screen from WayPoint Analytics)

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Manage on the 5 x 5
Manage on the 5 x 5

(screen from WayPoint Analytics)

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Inculcate cts thinking
Inculcate CTS Thinking

  • Measure and monitor CTS metrics

  • Always include CTS in process planning

  • Train everyone to be CTS-conscious

  • Establish CTS budgets for segment service models

  • Look for CTS improvements in everything (recognition incentives)

  • Make CTS a component of sales incentives

RB


Cts vs tpc
CTS vs TPC

  • CTS – Cost-to-Serve

  • TPC – Total Procurement Cost

TPC

  • warehousing

  • processing

  • delivery

CTS

  • uptime

  • on time

  • first time

BB


Identify cross subsidies
Identify Cross-Subsidies

Restaurant 46 clients

379 SKUs

$199,846 Net

$

Fast Food129 clients

379 SKUs

($233,974) Net

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Use profitable service models
Use Profitable Service Models

  • Transaction costs matter

  • “Full service for everyone” is a loser

  • Measure customer profitability:

    • protect & service big winners

    • move small/no profit customers to better service model

    • transform big losers

  • Use territory realignment to match reps and accounts for max performance & to protect best reps

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Qpm plays
QPM Plays

Sales

  • Manage on the 5 x 5

  • Delta PBIT Incentives

  • “More to the Core”

  • Customer Deltas

  • Cross-Sell Best Items

  • Optimize Territories

  • “Lead to Gold”

  • “Wholetail” strategy

Customer Service

  • Big 8 Service Metrics

  • People Engagement Metrics

    Product / Vendor Mgmt

  • Product consolidation

  • Vendor consolidation

  • Special-order business

  • Popular small picks

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With qpm you can
With QPM, You Can…

  • Manage by Granular Net Profit

  • Understand your CTS

  • Understand and Manage Cross-Subsidies

  • Tune Service Metrics for Each Niche

  • Use Profitable Service Models

  • Boost Morale, Customer Satisfaction, Profits“People, Service, Profits” – FedEx motto

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Wrap up

...recapping now…

Wrap-Up

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Qpm principles1
QPM Principles

  • You're making more money than you know.

  • Measure and evaluate at the quantum level.

  • Manage on net profit.

  • Manage the deltas.

  • Financial averages mask what's really going on.

  • Understand and manage service models.

  • Identify and stop non-strategic cross-subsidies.

  • Synchronize goals & incentives.

RR


Do s don ts
Do’s & Don’ts

Don’t:

  • manage with GP %

  • be fooled by averages

  • let cross-subsidies steal your profits

  • let personnel ignore CTS

  • perpetuate dysfunctional incentives

Do:

  • manage on Net Profit

  • get granular data

  • fit profitable service models to segments

  • infuse CTS everywhere

  • tie commissions and bonuses to Net profit

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About waypoint analytics
About WayPoint Analytics

  • Designed specifically for QPM

  • Best Cost-to-Serve (CTS) & Net Profit analysis tool available

  • Online, web-based subscription service

    • no hardware or software to buy

    • secure

    • no charge for updates or enhancements

  • Fast and inexpensive to implement

  • Strategy assistance from us

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Q & A

Q: Do I have to fire some customers?

Q: What will my important vendors think?

Q: What will the sales team Think?

Q: How do I know what to do?

Q: What’s WayPoint cost?

Q: How long does it take?

Q: Can I get a demo for my management team?

Q: Where can I get more info?

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Next steps
Next Steps

  • Discuss QPM with your executive team

  • Visit the QPM website www.quantumprofitmanagement.com

  • Get QPM recipes at www.merrifield.com

  • Get Bruce’s Course on DVD(list $995; webinar $300; FREE with WayPoint)

  • Arrange a detailed WayPoint review for your executive team (see WayPoint live in one hour)

  • Implement QPM at your company

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Follow up
Follow-Up

  • Follow-up E-mail:

    • webinar slide deck

    • Bruce’s “What is QPM?” article

    • links to Merrifield, WayPoint & QPM websites

    • order info for Bruce’s DVD course

    • information on WayPoint Analytics

    • QPM newsletter

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