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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

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

RR

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)

RR

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

RB

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

RB

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

BB

customer profitability ranking
Customer Profitability Ranking

(screen from WayPoint Analytics)

BR

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

penetrate

transform

(screen from WayPoint Analytics)

RBB

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

BR

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

(screen from WayPoint Analytics)

RR

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

RR

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

RR

financial averages mask reality
Financial Averages Mask Reality

(screen from WayPoint Analytics)

RB

manage the extremes
Manage The Extremes

Core Business

BR

customer profitability ranking1
Customer Profitability Ranking

(screen from WayPoint Analytics)

RB

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

(screen from WayPoint Analytics)

BR

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

BB

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

BB

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

BB

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

BR

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

RR

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

RR

slide36
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?

RR

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

RR

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

RR

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