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In the current economic environment, most companies have implemented cost reduction programs focused on facilities consolidation, headcount cuts, and reducing manufacturing and SG&A expenses. While these traditional cost reduction programs have resulted in some bottom-line improvement, the company’s financial performance often still suffers. The CEO is left with a dilemma. More arbitrary cost reductions can cut into the muscle of the company, endangering its long-term future. In the current dynamic marketplace environment, companies need to be properly positioned to take advantage of the business upturn as the economy begins to recover.
MarginMax™ is an integrated gross margin management solution from Thomas Group, a consulting company known for its ability to help its clients achieve breakthrough process performance. Successful client engagements have proven that MarginMax is the cost-effective answer to increasing margins at any point in the economic cycle. It provides companies with a way they can rapidly generate significant profits without embarking on major business transformation programs that can take years to bear fruit.
A MarginMax profit improvement program is the ideal next step after implementing a cost reduction program. MarginMax unlocks the dormant profits in a company that reside in the key drivers of gross margin, without additional headcount reductions or cutting into the financial infrastructure of the company. These drivers include the pricing process, product management, and sales effectiveness. A MarginMax program will also provide the foundation to position organizations toward future growth and profitability.
MarginMax is effective because it is a comprehensive solution to gross margin management that takes a holistic approach by integrating all four key drivers of improved profit margin:
Even a small increase in gross margin can substantially impact operating profits. That is why MarginMax can help a company achieve a 30-percent boost in operating profits.
Adopting the MarginMax integrated gross margin management solution in your organization does far more than improve your margins; it helps break down silos that can present barriers to business’ success. MarginMax aligns people and processes across your organization by focusing the senior team on gross margin as the key leverage point in the business. And because MarginMax is comprehensive, it improves both the convenience and confidence of executives who use MarginMax to assist them in making day-to-day operations decisions. At the same time, MarginMax helps them gain process transparency so important in corporate governance today. You get real-time metrics that put you in direct control of your gross margin. In short, MarginMax helps you define how your company wins in the marketplace going forward.
As already mentioned MarginMax is an alternative to expensive and extended corporate transformation programs. It is the profit margin platform you can implement rapidly and expect measurable near-term results.
Program benefits include:
The strength of the MarginMax solution is its integrated focus on gross margin management and its alignment with all the elements of your business. Business processes like disciplined pricing and product management may seem easy to implement but the undeniable fact is that few businesses are able to achieve them on their own. MarginMax is the fastest and most cost-effective way to achieve bottom-line improvements. It turns gross margin management into an ongoing business process you track and manage. And, it integrates and leverages all four gross margin drivers:
As each key-margin driver is improved, it has a direct, positive impact on your gross margin, but the synergy that results when you implement MarginMax produces results that are greater than the sum of their parts. As operational performance improves, for example, customer response times are shortened and on-time delivery improves as does overall quality satisfaction. As a result, sales effectiveness is enhanced. The sales force can now spend more time selling because it no longer has to expedite orders, process returns, or address quality challenges. As customer turnover declines, sales increase—all thanks to MarginMax.
MarginMax is a top-down process improvement solution directed by your company’s senior management team and implemented by driver teams. That is why the MarginMax evaluation process (which takes three to six weeks) is designed to be transparent. It identifies your company’s gross margin improvement potential and provides the executive team with a plan of action.
The evaluation phase includes:
The MarginMax Maturity Model is an important tool used by the Thomas Group during the evaluation phase to determine your company’s gross margin improvement opportunity in the four key-driver areas. The driver teams use the results of the Maturity Model to delineate the steps that must be taken to close current gaps.
The MarginMax Maturity Model rates, on a scale of 1 to 4 (1 being ineffective; 4 being highly effective), how advanced your company’s approach is in four pricing levers (above) as well as in ten other “ever categories.
The day-long Thomas Group Gross Margin Workshop provides your executive team with a framework that it then uses as it goes through the evaluation process. Business objectives set during the workshop include:
By the conclusion of the workshop, you and your executive team will have defined critical success factors, opportunities, and analysis tasks in all four key-driver areas.
The Gross Margin Workshop assists executives in setting objectives and critical success factors that provide the framework for the evaluation phase. Above is a typical example of workshop results.
The evaluation phase ends by supplying both the analysis and architecture necessary to launch a successful implementation phase. Outputs include targets, opportunities, architecture, schedule, and ROI summary.
The MarginMax evaluation phase is designed to ensure that your company’s MarginMax implementation team will be focused on your highest-leverage gross-margin drivers.
The implementation phase takes from six to 12 months and includes the entire senior management team attending the Gross Margin Workshop. Other important aspects of the implementation phase include:
Once you begin to implement MarginMax, you will notice improved profit margins after three months; substantial paybacks should begin to emerge in six to 12 months.
The implementation phase includes installation of the MarginMax dashboards that measure both key drivers and margin results; they literally track the impact MarginMax is having on overall enterprise performance. The MarginMax dashboards are hierarchical at both the driver-team level and the implementation-team level; thus, they play an important role in assisting the entire organization to align their efforts and focus on the key drivers of gross margin.
The MarginMax solution is a holistic, comprehensive approach to gross margin management that integrates pricing optimization, product management, sales effectiveness, and operational performance, the four key drivers of profit margin. MarginMax turns gross margin management into a business process you manage using the MarginMax dashboards. Some of the benefits of participating in a MarginMax program:
The most important reason for implementing MarginMax: the potential for your company to achieve a five to 10 percent increased gross margin, which can translate into a 30-percent increase in operating profit.