Background
Tevo sources, develops, markets, and distributes innovative, quality products that enhance its end-customers’ experience. The business required enriched sales and cost data to ascertain its net product cost accurately. This information is critical in driving their pricing and promotional strategies. It was imperative to this retailer to have a comprehensive insight into their gross profit and other costs associated with selling a product to end-user.
Challenge
A key metric for the retailer is how much profit it will make on each stock-keeping unit (SKU), or product. This could only be accomplished by accounting for a range of variables which, in the past, Tevo could not accurately factor into its profit calculations. The distributor needed to be able to calculate contribution margins.
Approach
Firstly, it was decided which key variables needed to be included in the contribution margin calculation. Secondly, it was determined how to bring each of those metrics into the model. This required extensive collaboration between key internal Tevo stakeholders, an outside vendor that assists with the organisation’s payroll system, and Keyrus. Once this was set up, Keyrus designed a solution involving SQL Server Integration Services (SSIS) and a SQL Server database-driven LOB system. This data is then transformed and combined, using Transact-SQL (T-SQL) scripts and SSIS, before being loaded into SQL Server Analysis Services (SSAS) cubes where it is accessed by various BI tools. Tevo’s senior stakeholders currently use Excel as the reporting tool to analyse the information.
Key results
Benefits
Speedy and effective data processing and accurate reporting now give the customer a detailed understanding of their value chain to secure their competitive advantage. They can accurately see the contribution margin values, and are able to obtain a comprehensive picture of all the costs associated with selling products to their end-users. The customer has accurate insight into the profit it makes on each SKU sale to effectively negotiate with the retailers. Accurate profit calculations are extremely important and influence various types of decision-making across the organisation. Tevo can now answer questions such as: Should we continue selling that particular SKU? Or Should we reduce or increase the price of a particular SKU? The solution has equipped Tevo’s analytics team to analyse the variables that can now be calculated and incorporate them into the model. They can now better understand the correlation between how much they spend on the salaries of the sales staff in stores trying to promote products, versus the actual sales of those products. They are also better equipped to answer questions around rebate performance, as well as how other variables such as warehousing and distribution influence the overall performance of their profits.
What our clients say
We now have accurate insight into the profit we make on each SKU sale. We are also better equipped to answer questions around all aspects contributing to the overall profit performance.
Jared Davey, BI Manager, Tevo contribution margin
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