SUPPLY CHAIN SERVICE STRATEGY

R i g h t S e r v e ™

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Figure 3.5 RightServe™ Business Valuation Factor Table We use those data points to evaluate, rank, and stratify the customer base. Some examples follow. Large Food Company Customer Business Valuation We were recently retained by a large food company who was lagging their industry’s net income norms. Their RightServe™ customer business valuation is illustrated in Figures 3.6 to 3.7. Figure 3.6 is a classic ABCD stratification of customers based upon revenue, gross margin, operating income, and net income. In the RightServe™ methodology, the customers who contribute the first 50% of revenue, margin, profit, income, and/or return are stratified as A customers. The customers who contribute the next 30% are stratified as B customers. The customers who contribute the next 15% are stratified as C customers. The customers who contribute the last 5% are stratified as D customers. The matrix also draws attention to any customers for which we are losing margin, income, and/or profit. In this case, our client was losing $670,000 in annual margin serving 20 D customers; $7,306,000 in annual profit serving 39 D customers; and $9,754,000 serving 43 D customers. Once those non-value added customers were identified, their sales contracts were reviewed and quickly cancelled or re-negotiated Our client was