Gross margin gains through deeper customer understanding
Client Stories
The Story
The portfolio company of a private equity firm was struggling with low gross profit margins which had remained resistant to multiple company efforts at improvement. The company operated in a highly competitive B2B marketplace where nearly all its work needed to be won as through a bidding process. Worried about losing market share the company regularly offered what it believed to be high competitive prices to its name brand customers to avoid drops in revenue.
Starting with profitability
The company’s board engage Barcley to help them gain an understanding of customer profitability in real time. Due to the intricate nature of the company’s inventory and operations, the management team lacked a clear understanding of the factors influencing profitability, particularly on a customer level.
To address this challenge, Barcley worked alongside the COO to create an economic model that could effectively assess profitability at the most granular level of production. By costing out each production process, our company was able to identify where there were hidden costs in its business.
As part of the project, we delivered to the company a set of interactive dashboards that allowed management to look at profitability by any combination of product, customer and geography. This revealed a unique set of opportunities to remediate loss-making customers, rationalise unprofitable products and expand high margin segments. It also resulted in a realignment of salesforce incentives away from pure volume growth and towards absolute margin realisation.
