SUPPLY CHAIN SERVICE STRATEGY

24 | R i g h t S e r v e ™ Beverage Company Customer Business Valuation During a recent engagement with a large beverage client we were provided with data that allowed us to compute the return-on- invested-capital and operating profit for each of their customers. The analysis is illustrated in Figure 3.9. To their astonishment, they had over $100 million invested in serving customers with negative net income contributions (43% of the customer base), and over $140 million invested in customers yielding less than a 10% return-on- invested-capital (their corporate threshold). They were also surprised to learn that 95% of the company’s operating profit accrued from serving just 18% of their customer base. These revelations shed a very alarming light on the company’s policy to provide the same service offering to each of its customers, and motivated the development of a formal and segmented service optimization and offering.

Figure 3.9 RightServe™ Customer Business Valuation