A $50 million consumer products manufacturer was selling $4 million of product to a national drug store chain. By utilizing customer product line profitability reporting, including SG&A costs, it was determined that the best selling product line was actually losing money on a variable cost/cash basis and the other product lines while profitable could not compensate for the losses. The company decided that it either had to raise prices or cease selling to this customer. The customer was ultimately successful in raising prices.
A $25 million home furnishings distributor selling to specialty retail customers expanded its product line to provide a complete product offering to its customers. Upon review it was determined that the product line had significant warehousing, inventory and handling costs as well as quick obsolescence of inventory. The company ultimately decided to discontinue the product line and reallocate the funds to other product lines already being sold by the company resulting in quicker deliveries and increased sales.
A $30 million manufacturer of specialty films and chemicals implemented a sales and operations planning process to better align the manufacturing and sales functions. Production and sales and inventory management were measured on a common unit basis allowing for comparison and analysis of the different departments. This resulted in quicker sales order turnaround times, improved customer service, reduced inventory and lower labor costs.
A $25 million food products manufacturer was losing money due in part to the large number of products it offered. Product sales turnover was measured on an SKU basis. As expected the top 20% of the SKUs accounted for 80% of the sales. The company rationalized its product line and reduced the number of SKUs made-to-stock while increasing the number of SKUs made-to-order. Through effective communication and inventory management the company actually grew sales while increasing profitability and customer satisfaction.
For additional information contact Jeffrey N. Klar at
(201) 338-0470 or via e-mail at jnklar@jiainformration.com
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