SUPPLY CHAIN SERVICE STRATEGY

E d w a r d H . F r a z e l l e , P h . D . RightChain™ The RightServe™ Customer Business Valuation Pareto ranks customers from high-to-low in revenue, margin, profit, and net income and then plots the cumulative revenue, margin, profit, or net income at that point in the ranking. An example is in Figure 3.7. which ranks our client’s customers by net income with the customer producing the highest net income at the far left and the customer producing the lowest net income at the far right. As is typical with margin, profit, or net income paretos, there are four distinct stratifications of customers corresponding to break points in the graph. The customers under the portion of the curve with a strongly positive slope, “A” customers, are those customers with high positive contribution. The customers under the portion of the curve with a slightly positive slope, “B” customers, are those customers with a slight positive contribution. The customers under the flat portion of the curve, “C” customers, are breakeven customers. The customers under the portion of the curve with negative slope, “D” customers, are fiscal liabilities. A third helpful diagnostic in customer business valuation is the RightServe™ XYZ chart. An example is provided in Figure 3.8. Customers are plotted on an X (Revenue) and Y axis (Net Income). Customer data points are sized by Gross Margin %. Those customers with high revenue, high net income, and a high gross margin percentage have the highest business valuation. Those customers with low revenue, low net income, and low gross margin percentage receive the lowest business valuation. | 21