2. Questions to Answer
• Where did my EBIT(D)(A) go?
• How is Profitability Analysis different from
reading financials?
• How can it foster growth?
• How can I begin to implement?
6. Waste
Any part of the process that
does not add value to the
• Customer
• Or Your Organization
7. What is value to the customer?
• Voice of the Customer (VOC)
– “… insight in to customer needs, wants, perceptions,
and preferences…” (www.businessdictionary.com)
– We use this data to align company resources with
customer expectations
8. What is value to your
company?
• Voice of the Business (VOB)
– “A summary of all needs related to a business and its
stakeholders, including profitability, revenue, growth
and market share.” (www.businessdictionary.com)
– We use this data to align operations with stakeholder
expectations.
13. Customer Profitability
• Profitability Drivers and Metrics
– Transactional (IS)
• Order Size
• Order and Line Count
– Fulfillment (WHSE)
• Shipping Method
• Line Item Value
– Support (OS)
• Outside Sales
17. Supplier Profitability
• Profitability Drivers and Metrics
– Lead time
• Comparison to Industry
• Variability
– Quality
• Product Defects
• Shipment Accuracy
– Policies and Procedures
• Freight Policy impact on EOQ
• Ordering System and Acknowledgement Process
18. Supplier Profitability
• Profitability Drivers and Metrics
– Growth Potential
• Under utilization
• Vendor consolidation efforts
• Market based potential
19. Final Thoughts on Profitability
• Financial Statements do not reveal where the
lost profitability has gone
• Three Areas that consume resources
– Customer
– Product
– Supplier
• We must consistently think in terms of
eliminating waste in those relationships