SAP Net Margin Analysis Boosting Profitability Through Full-Cost Visibility: Product Demo

Find out how SAP Net Margin Analysis addresses a key issue that faces companies today: margin visibility and management. Learn how it brings to life the impacts of cost- to-serve and how that impacts various dimensions of the business from customers to products.

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  • http://global.sap.com/demos/mmov/demos/sap-net-margin-analysis-boosting-profitability-through-full-cost-visibility-demo-us.mp4
    • SAP Net Margin Analysis Boosting Profitability Through Full-Cost Visibility
    • With the SAP Net Margin Analysis analytic application, you can determine the costs-to-serve for different customer segments, so you can identify areas to reduce costs to transform profit- destroying customers into profit-neutral, or better yet, profitable customers.
    • See how the software can help your executives: Reduce costs, Transform relationships with profit-destroying customers, Identify the most-profitable customer and product segments, and Uncover net-margin improvement and cost-reduction opportunities
    • In this demo, Andy is the CFO for a company that specializes in business-to-business transactions.
    • He looks at the “Net Profitability Analysis Summary” to get a high-level overview of performance across the whole organization with a focus on net margin and cost, from a multidimensional perspective.
    • Andy focuses on the high-level results in the scorecard for key performance indicators at the top left.
    • And, he reviews the heat map at the lower right, which shows the percent of net margin by customer segment and by product division.
    • Now, Andy wants to analyze what's happening in the various segments, so he calls in Carol, the VP of sales, and together they review the Customer Segment Analysis Dashboard.
    • Starting with the Key Account segment, they review the KPI Scorecard, which shows that “Net Margin” is down relative to target and is trending down.
    • They also see the figure for profit-destroying customers is 30%—that's up 5% from last year.
    • Next, they look at the Segment Benchmark of Cost Profiles, where a stacked, bar chart shows cost profiles for profit-creator, break-even, and destroyers segments.
    • Apart from the cost of goods sold, all the costs for the destroyers are higher, with distribution, selling, and return costs looking much worse.
    • Here, they can see which costs are higher for destroyers than for creators: these are "discount" and "elements of cost-to-serve"—including distribution, selling, and returns and warranty.
    • The high costs are highlighted with a red traffic light in the chart at the top right.
    • Andy and his colleagues can develop strategies to reduce these costs by bringing customers that are now in the profit-destroying segment into the profit-creators segment.
    • Now, they look at the bar chart showing the top- and - bottom ten performers in net margin, which shows customers ranked by net margin dollars.
    • The default view shows the top performers, with the customer Figgo delivering the most net margin.
    • They also see that Figgo is the top-performing customer, in the whalebone chart at the lower left.
    • By focusing on the top-ten valued customers, and how to best serve and retain them, Andy's company can improve profitability.
    • Now, they decide to look at the bottom ten performers in detail.
    • They see clearly how the bottom ten performers destroy net margin, beginning with Aterstrond Devices, which shows a loss of more than $700 thousand.
    • The same information can be seen in the whalebone curve at the lower left.
    • They see that the percentage of cost-to-serve varies from more than 26% to more than 33%, and that cost-to-serve is the main cause of the negative net margin.
    • If Andy's company can reduce cost-to-serve by 6%, it can transform most of these customers into profit creators.
    • To make this happen, Andy will conduct a review of the bottom ten profit destroyers to determine how performance can be improved.
    • And, he will schedule a meeting with the account manager for the worst-performing customer to look at its Cost Profile.
    • The Call-to-Action dashboard helps Andy plan how to reduce cost-to-serve and increase profit margins for customers that offer high revenue but low margins.
    • The customers in this segment—the transformation group—are customers he wants to keep, but he needs to improve their net margins.
    • Here, he can quickly see which customers offer transformation opportunities.
    • When he clicks on the bubble for the worst performer, Aterstrond Devices, it is highlighted in orange and is immediately compared to the winner, Figgo, which is highlighted in blue.
    • Below, he can review the five costs that show the greatest variance.
    • If the Account Manager for Aterstrond Devices can narrow the gap for these costs and change the profitability profile of the “Transformation” customer, he can bring it closer to the winner, Figgo.
    • Andy moves the sliders for the costs with the larger variance and to understand how aligning the costs closer to the winner customer would affect financial performance.
    • With this dashboard, it is easy to see areas for improvement, and what that improvement means in financial terms.
    • Andy can go through this process every month with the account managers to improve cost-to-serve processes for transformation customers.
    • Through benchmarking analysis, with SAP Net Margin Analysis, companies can focus on profit destroyers with high revenue, and work to transform customer relationships to dramatically reduce costs and increase profitability.
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