To control and effectively influence margins, a detailed analysis of all costs associated with customer service and product delivery is essential. This includes costs for order placement, order processing, order picking and transportation to the customer.
In the finishing industry, companies can achieve significant cost savings by carefully analyzing these activities. Understanding which customers and orders generate relatively higher or lower costs enables strategic adjustments to control costs and improve profitability.
Segmenting customers based on cost per customer and product
Analyzing costs by customer and by product provides valuable insights, especially in the breeding industry, where the nature and frequency of orders can vary widely. By segmenting customers based on cost effectiveness, companies can identify orders that are disproportionately costly. Companies can then take targeted actions based on this segmentation, such as incentivizing larger orders through volume discounts or introducing self-service options. This increases efficiency and lowers unit costs.
Margin Leakages
In-depth analysis of customer and product costs enables controllers and pricing managers to optimize margins by addressing "leakages" in the. These are situations where losses in profit margins occur due to inefficiencies, unexpected costs and activities that can be more specifically applied
By using margin waterfall analysis, these "leakages" can be identified and targeted actions can be taken, such as adjusting pricing strategies or revising service agreements. This ensures profitability without compromising customer satisfaction.
Scenario Analyses
In addition, a combination of detailed cost analysis and scenario analysis gives controllers the flexibility to respond quickly and effectively to changes in the market, such as rising commodity costs or changing customer behavior. Applying technologies that deliver real-time data insights increases the effectiveness of analytics. This enables companies to continuously optimize margins and profitability in a dynamic marketplace.
Want to learn more about this type of analysis and what it takes to do it? Contact us for a free consultation and find out what steps you can take to improve margins as well.
