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Beyond Surviving Optimizing Profitability

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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  1. Beyond Surviving Optimizing Profitability

  2. M&A Activity in Wholesale Distribution * Excludes transactions in the retail consumer markets Source: Pembroke Consulting

  3. Distribution Trends – EBITDA Multiples 2007 2005 2006 2004 Source: MDM, Vol38, No. 4, February 25, 2008

  4. Top 10 Public Distribution Firms By ROIC% Source: MDM, Vol38, No. 4, February 25, 2008

  5. The ROI Equation Financial Statements  “Balance Sheet” &“Income Statement” encapsulate the results of the above activities

  6. DistributionBusiness Process Framework

  7. Educational Session Deliverables

  8. Supply Chain Planning Key Performance Indicators (KPIs) Business Process Framework Supplier Customer

  9. Business Process Groups – Summary

  10. Financial Framework

  11. Financial Drivers

  12. Optimizing Distributor ProfitabilityMethodology

  13. Optimizing Distributor Profitability – Methodology

  14. Performance Assessment

  15. Best Practices Framework Best Practices Good Practices Performance Common Practices Time

  16. Process Assessment

  17. Custom Process Assessment Report – Sample

  18. 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

  19. Cross-Channel Financial Benchmarking

  20. Cross-channel Financial Benchmarking Report

  21. Optimizing Distributor Profitability – Methodology

  22. Connecting Processes and Shareholder Value $hareholder Value

  23. Distributor Profitability Framework – Concept

  24. Distributor Profitability Framework

  25. Optimizing Distributor Profitability – Methodology

  26. Source Group Analyzer – Schematic Diagram

  27. Optimizing Distributor Profitability – Methodology

  28. Best Practices Roadmap – Sample

  29. Best Practices Roadmap – Sample

  30. Optimizing Distributor Profitability – Methodology

  31. Balanced Score Card (Kaplan & Norton)

  32. Linking Implementation Components

  33. 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

  34. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

  35. 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

  36. Supplier Stratification

  37. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

  38. Linking SOURCE Processes to Shareholder Value Process Group Process Process Metric Financial Elements Financial Metrics

  39. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

  40. 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

  41. Source Group Analyzer – On-Time Delivery

  42. Potential Profitability – Olympic Distribution

  43. Potential Profitability – Olympic Distribution

  44. Potential Profitability – Olympic Distribution

  45. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

  46. 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

  47. Customer Relationships

  48. 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

  49. Potential Profitability – Olympic Distribution

  50. SELL Real World Example

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