Gross margin flatters the customer file
Once drops, returns, credits, rebates and carriage are attached, a meaningful part of the customer base is usually loss-making, and it is rarely the part anybody expected.
Distribution and wholesale
Cost to serve, at the level of the customer and the SKU
Stock, service and margin in one picture, so the discussion about range and terms is settled with evidence rather than seniority.
Distribution runs on thin margins and enormous SKU counts, which is exactly the combination that hides losses. Rebates, drops, returns, credits and carriage sit outside gross margin in most systems, so a customer can look profitable at invoice level and cost money by the time the year closes. We rebuild cost to serve properly and hold it against stock and service, so range decisions, terms and minimum order values are set from the same numbers.
Discuss your operationWhat we usually find
The problems that come up in almost every one of these businesses.
Stock decisions are made from a stock report
Slow movers are judged on cover rather than on the margin and service they support, so the range gets cut in the wrong places and the same lines are back within a year.
Rebates are settled once a year, in hope
Supplier and customer rebate positions accrue on a spreadsheet outside the system, and the true landed cost of a line is not known until somebody reconciles it manually.
Where we start
What the first engagement usually covers.
Scope depends on the state of your systems. These are the pieces that recur in this sector.
Cost to serve
Drops, picks, returns, credits, carriage and payment terms attached to the customer and the order, so profitability survives contact with the full cost base.
SKU and range economics
Margin, velocity, stock cover and substitutability held together, so range decisions weigh what a line supports rather than what it holds.
Rebate and landed cost
Supplier rebates, settlement discounts and inbound freight brought into cost of goods, so a line's real margin is visible before the year-end true-up.
Service and availability
On-time in-full measured the way your customers experience it, joined to the stock and supplier decisions that drive it.
What changes
What is different afterwards.
You own all of it: the code, the written definitions and documentation aimed at whoever maintains this after us.
- Customer profitability after the full cost to serve
- Range decisions evidenced by margin, velocity and service
- Landed cost including rebates and inbound freight
- Minimum order values and terms set from real economics
The builds behind it
Sector knowledge decides the order. The builds are the same four.
Single source of truth
Your finance, customer and operational records joined into one dataset, with each figure defined once and traceable back to the system it came from.
Analytics layer
Reporting built on top of the joined data, aimed at the few revenue and cost drivers that actually change the result.
Workflows
One defined task, automated inside a process that already exists, measured against whatever it replaced.
Financial modelling
Driver-based models built on the same definitions as your reporting, so the forecast and the actuals stop disagreeing.
Worth asking
Questions this tends to answer.
- Which customers cost more to serve than they contribute?
- Which lines earn their place in the range?
- What is our true landed cost once rebates are counted?
- Where is availability costing us orders?