Click here to print PDF file
In today’s economic Climate companies cannot simply grow their way out of profit problems. Manufacturing costs have been cut to the bone, there is pricing pressure, and demand is declining. Thomas Group offers an integrated approach to maximizing gross margins, called MarginMax™, providing a company with additional strategic alternatives to achieve bottom-line results.
Improved gross margins are one of the most powerful levers of financial performance. To illustrate, a $400 million company that can increase its gross margin rate by three percent will add $12 million to their gross margin which is a 30 percent increase in operating profit.
The MarginMax methodology is implemented by focusing on gross margin as the leverage point and incorporating all the key drivers of gross margin into an integrated margin improvement program that aligns execution to strategy. The key word is integration. Operational cost reductions alone are not sufficient in today’s business climate to achieve profit objectives; an integrated approach is required.
The companies that employ the MarginMax methodology to manage their gross margin will successfully deliver sales growth, improve customer satisfaction, remove internal barriers that separate departments and disciplines, and increase bottom-line results and shareholder value.
MarginMax aligns the organization to facilitate the understanding and management of all the key drivers that maximize gross margin. The four key gross margin drivers are:
Each of these key drivers of gross margin must have concrete, margin-related objectives, concise, margin-related measurements, and clear ownership in the organization. All of these drivers have a substantial process element, which requires a strong cross-functional team effort to achieve successful implementation and continuous improvement. Maximizing gross margins requires focus on the right drivers and alignment of these objectives from the senior management team to the front-line people closest to the action. Integration, focus, alignment, and teamwork sound simple conceptually; however, few companies do it. The good news is that all can.
Integrated gross margin management is a unique, sustainable methodology that focuses on all the key margin drivers. The synergy from understanding the interdependence of the key gross margin drivers produces results that are greater than the simple sum of the parts. Operational performance improvements enhance sales effectiveness. Product management drives improved operational costs and improved sales. A gross margin-focused sales force improves operational costs, the pricing process, and product management. Additionally correct pricing strategies and processes benefit product management, sales effectiveness, and operational performance.
The objective of a MarginMax program is to increase your gross margin five to 10 percent and deliver a five to one return on your investment. Flags that indicate a company has gross margin opportunities are:
If these flags exist in your company, MarginMax, coupled with our team of experts, will enable you to take advantage of your gross margin opportunities.
Determine your Gross Margin Opportunities
Product Management: Gross Margin Drivers
Automotive Parts Recycler