Commercial Fuels Marketer
We engaged at a $700 million fuel wholesaler focused on industrial and transportation customers. The business was focused on driving volumes, largely through the use of term purchase agreements, and was minimally profitable. Management reporting and planning processes were focused on distributive area, rather than more actionable territories or customers, and were mostly driven off of annual cycles. Further, lacked visibility into customer level discounting practices. As a result of our project, the company realized a $20 Million improvement in gross margins, and a 25% increase in operating income.
Price and Discount Optimization
Our analysis focused on unraveling the profitability of its customers, especially its term contracts. The model revealed that customer discounts had little correlation to volume or overall value to the company. Term pricing agreement were also arbitrary. Focus interviews throughout the company lead to the conclusion that most price setting was a results customer specific negotiations rather than the profitability of the business.
Accunomics’ consultants engaged with the management team to rationalize the pricing and discounting process. The business disintermediated select jobbers to drive higher margins, and tested the elasticity of its prices. Most importantly, the sales people become more disciplined in aligning net prices to total volume and overall customer profitability. The smaller customers no longer received the same great deal as the larger customers.
Management Operating System
Our consultants worked closely with the client to implement a comprehensive management operating system. The system provided pricing dashboard and term contract pricing frameworks to continually optimize margins. It also enabled sales persons their supervisors to plan their financial performance at the territory and account level, and to actively update the plan throughout the year. Output from the dashboards and plans drove a series of structured meetings through which the company ran its business.