Managementul Marjei de Profit / Gross Margin Management

Our Gross Margin Management approach delivers superior profits and improved cash flow by tackling gross profit and gross margin through four key variances: price, cost, volume, mix. This is especially important for companies with large assortment of products that want to evaluate and optimize their gross margin investments and merchandising decisions.

Gross Margin and Profitability

Gross margin is a sign of business financial health. Changes to gross margin impact the bottom line profitability of a business. Organizations that understand gross margin at all levels of their activity, both as a variable number and as a percentage, operate their businesses better and are more resilient to external environment changes.

By adopting our integrated GMM framework, a company will do far more than improve its margins. It will break down silos that can present barriers to business success; align people and processes across the organization; and enable smarter decisions related to pricing, cost of products, fixed and variable operation costs, etc.

Expertise and Tools

Even companies that did not develop a sophisticated performance analysis system can easily apply our gross margin analyses. Our methodlogy is based on a holistic approach by integrating the 4 key drivers of improved profit margin – pricing, cost, volume, mix – with the value delivered to the end customer.

The following main elements are part of our approach to Gross Margin Management:

  • Gross Margin Workshop for key executives;
  • An analysis of company’s margin drivers and related processes;
  • An in-depth definition of the results the company can achieve with our GM Framework;
  • A Gross Margin/Profit Gap Analysis;
  • GM Framework development and customization to company’s special circumstances;
  • GM Framework implementation roadmap;
  • Execution and Follow-up

Methodology and Benefits

The following key activities are part of our methodology for undertaking GMM project:

  • Diagnose the current systems and practices of Gross Margin Management;
  • Identify the drivers and reasons for deviations by applying variance analysis: price, cost, mix, volume;
  • Link the outcomes of analysis with the company’s sales and merchandising initiatives;
  • Analyse the product assortment and each type pf sales promotions, action within assortment;
  • Analyse the inter-relation of GM mix and profit volume variance in order to understand customers’ behaviour;
  • Develop an action plan with immediate measures to improve GM and gross profit;
  • Train and transfer knowledge to company’s key users (controllers, finance and business managers);
  • Institutionalize the GMM best practices for continuous improvement.