ABC Supply subscribed to Waypoint Analytics’ distributor cloud service – in mid ’18. The owners saw the upside potential of (customer and SKU) net-profit analytics. But, the CFO and VP of Sales felt the new insight threatened their traditional beliefs.
After some education and tiny experiments, collective courage did emerge to commit to new plays for big results. Sales have grown over the past 36 months at a 10% annual rate while the profit margin waxed from 3% to a current 12.9%.
Customer-Centric Plays Are Key
Before Waypoint, ABC believed all (and more) customers were good. The new analytics revealed: two pools of unprofitable customers; and a few, super-profitable customers that were being under-served.
Out of 6800 active accounts in mid ’18, they had:
- 1300 small accounts that generated no margin dollars after sample and return costs and an annual loss of (180K) after order-fulfillment costs.
- And, 49 accounts with good margin dollars, but with unprofitable, average order sizes. The group’s cumulative loss was (68K).
The Busy-ness from the losing customers’ small-orders prevented doing a better job for the best and target accounts. So, ABC simultaneously started to fix the losing accounts through order-consolidation tactics while focusing everyone’s attention on doing more for best accounts.
- Two thirds of losing minnows turned profitable with new terms. The pool of small losers dropped from 1500 to 500 with group losses dropping from (180K) to (12K).
- The large-margin-dollar losers dropped from 49 to 1. Group losses dropped from (68K) to negligible; and orders from 5200 to 12.
- And, the top 10% of the most net-profitable customers grew in both sales volume and profits from 35% to 47%.
“Order-Size Leverage” Has Soared
Regardless of order-size, many order-related activity costs are static: sales calls; order-entry; picking, packing, shipping; A/R paper-based billing and collecting. This theory is proven by ABC’s results:
- Total order count/year and employee count remained flat.
- But, sales/order climbed from: $258 to 277 (+7%) then to 344 (+115%).
- Gross margin dollars/order grew from: $68 to 70 (+3%) and then to 95 (+36%).
- The average, all-in-cost/order was flat: $52, 50 and 52.
- SO: profit/order scaled from: $16 to 20 (+25%) to $43 (+115%)
- And, the – GP $s, Profit $s and Gain-Sharing $s – per employee all burgeoned!
Is It Time To:
Get Order-size savvy with my webinars #3 – 10 . And, then get a waypointanalytics.net demo?