贝恩咨询分析方法-ProductLineProfitability

Cost collection:
Cost assigned to products:
Typical accounting system
• By function
(e.g. R&D, advertising)
• Cost of goods sold
– direct labor – direct materials
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Product Line Profitability
Typical Accounting System Versus Bain PLP
Unlike typical accounting systems, PLP involves driving below gross margin and allocating costs to get to an operating margin for each product line.
Gross margin: Gross margin percent:
6.00 - (1.75 + 2.40) = 1.85
31%
$6.00 $1.93
0.45 hours x 8.00/hour = $3.60
6.00 - (1.93 + 3.60) = 0.47 8%
• Standard excludes loss • Increased loss due to
in the production of the product or service. These costs can easily be identified with a particular product
• Tracked using
accounting standards
• Variances
allocated based on percent of sales
• Allocated based on
actual cost drivers
Direct labor Packaging Ingredients
Direct costs
Coffee production costs
• Costs incurred directly
Senior managers can use PLP analysis to make important decisions about product lines.
Why Bain Uses PLP
• For which products should we increase prices? • Where should we focus our cost reduction efforts? • Which product lines should we drop? • Which products should we focus R&D efforts on? • Where should we provide sales incentives?
• Costs generally
incurred by the firm outside of the production process. These cannot easily be identified with or assigned to a particular product
• Not allocated or
Profitability
20%
Bain profit improvement tool kit
15%
• PLP
10%
• BDP• RCP Nhomakorabea5%• VMR
0%
0.1
0.2
0.5
1
2
5
Relative Market Share
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Profit Line Profitability
• Prioritize delivery
schedules inappropriately
• Establish wrong
truck load ratios
Product development
• Fund unprofitable
products
• Kill profitable
products
change in supplier quality
• Standard excludes switchover from main produce
• Increased labor due to rework from lost
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Product Line Profitability
100%
$500MM
Pine
Picture Frames
$35MM
80%
Cherry
60%
Maple
40%
Percent of Total
20%
Oak
PLP Description
Operating Margin 2.3% 5.3% 7.0%
10.0%
0%
Revenues
Operating profit
sometimes not tracked by product
• All direct costs,
including variances, are tracked by product
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Product Line Profitability
Inappropriate Direct Cost Allocation
Product Line Profitability
Product line profitability (PLP) is a diagnostic tool that helps us determine the “true” profitability of each product within a multi-product portfolio.
Key product profitability measure: Cost allocation method:
Disadvantage:
• Gross margin
(revenue - cost of goods sold)
• Accounting standards
• Often does not reflect true
commitment of resources and the returns for their use
Bain PLP
• By product line
• All costs, including all
indirect costs – overhead – advertising – distribution
Product Line Profitability
Author:
Gisele Garraway
Contributor: Steve Berez
March 1998
Product Line Profitability
•PLP overview •Applications •PLP steps •Client example •Challenges •Key takeaways
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Product Line Profitability Potential for Mismanagement
Failure to tie direct and indirect costs to individual product lines can cause firms to mismanage their businesses.
Traditional accounting systems often allocate only direct costs, not indirect costs, to products. And, in some cases, the direct costs are allocated inappropriately.
Percent of Total
100% 80% 60% 40% 20% 0%
R&D G&A Selling Distribution Advertising
Overhead
Definition
Typical accounting allocation
PLP allocation
Indirect costs
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Product Line Profitability Paths to Low Profitability
Multi-product businesses that do not understand their products’ true profitability become low profit firms.
Sales and marketing
• Spend advertising
dollars on wrong products
• Set up compensation
and incentives to encourage sales of unprofitable products
Distribution
Accounting standard
Actual for last quarter
Difference