Customer Profitability

Profitability solutions typically start with a costing exercise to make sure that granular expenses assignments are correct. Modeling the revenue is normally much easier to provide in profitability calculations. Costing in a sales, product handling, and distribution environment may be viewed from 2 primary dimensions, namely Product-driven costs and Customer-driven cost. Product-driven cost are primarily all the product management activities that relate to the Receiving, Storage, and Further Handling that is performed irrespective of whom the customer or end-delivery entity is. Customer-driven costs relate to those activities necessary to facilitate the ordering and sales process and completing the delivery along a given route. Essentially the product of the customer profitability model is a Customer P&L represented here.

Essentially the costing exercise for the customer profitability model is the same as for product costing & profitability. The main differences include the source systems, the activities that consume expense and the volumetric inputs. Product and product profitability may be combined in a contribution matrix.