Rapid Profit Improvement (Series Post no. 9 – Product Mix)
Continuing this series of posts, many Business Owners and Managers are facing challenges when trying to identify specific areas where additional business profit may be waiting to be unlocked. This is an area in which a fresh set of professional eyes – like ours – can often rapidly uncover previously hard-to-see profit opportunities as we will be looking at your Business from a fresh perspective.
Case Study No. 9 – Product Mix.
The owners of a $5M turnover food processing plant were concerned about their low margins. A review of their costing models and supply chain, using our Rapid Profit Radar Diagnostic, highlighted that they were obtaining their supplies of raw materials from one major, and six smaller, suppliers.
The costing models only included the prices of raw materials from the major supplier which delivered its raw materials freight free. The smaller suppliers, which provided 33% of the raw materials, matched the major supplier’s raw material price but included a freight charge. This freight charge, which contributed 14% of the total material cost, was not included in the costing model.
This needed to be rectified, so we had our client add the freight charges into the cost of materials, and the resultant increase in their sale price resulted in a 10% – or $500k p.a. – increase in their gross margin.
In addition, our Rapid Profit Radar Diagnostic, highlighted significant issues in their manufacturing processes which we were able to correct to prevent a reoccurrence of the costing model issues.
We always run a Zero-Risk policy with our customers… No Profit Improvement – No Fees.
For more information on creating or improving a business model please call John on (021) 625-871, and further more information please visit Into the Blue.
