贝恩咨询分析方法-ProductLineProfitability

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贝恩咨询分析方法ProductLineProfitability
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.
• 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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贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
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贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
•Paths to Low Profitability
•Multi-product businesses that do not understand their products’ true profitability become low profit firms.
•Picture Frames
•PLP Description
•Operating Margin •2.3% •5.3% •7.0%
•10.0%
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贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
•Profit Improvement Tools
•If gross margins are based on inappropriate accounting standards and indirect costs are not allocated appropriately
•Agenda
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贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
• PLP overview • Applications • PLP steps • Client example • Challenges • Key takeaways
•Sales and marketing
• Spend advertising
dollars on wrong products
• Set up compensation
and incentives to encourage sales of unprofitable products
•Distribution
•Direct and Indirect Costs
•Traditional accounting systems often allocate only direct costs, not indirect costs, to products. And, in some cases, the direct costs are allocated inappropriately.
•Indirect costs
•Price: •Gross margin: •Operating margin:
•$750 •40% •29%
•$60 0 •33 % •20 %
•$450 •44% •23%
•On a gross margin basis, J-88s are the most profitable; however, T-54s are most profitable when all indirect costs are allocated
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•Bain profit improvement tool kit
• PLP • BDP • RCP • VMR
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贝恩咨询分析方法ProductLineProfitability
Profit Line Profitability
•Senior managers can use PLP analysis to make important decisions about product lines.
•PLP analysis is one of the Bain diagnostic tools that can identify sources of profit improvement.
•20%
•15%
•Profitability
•10%
•5%
•0%
•0.1
•0.2
•0.5
ຫໍສະໝຸດ Baidu
•1
•2
•Relative Market Share
贝恩咨询分析方法ProductLineProfitabilit
y
2020/12/10
贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
• PLP overview • Applications • PLP steps • Client example • Challenges • Key takeaways
• Operating margin
• Activity-based cost drivers • Difficult to capture all
activities that drive costs
贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
•6.00 - (1.75 + 2.40) = 1.85
•31%
•Actual for last quarter
•Difference
•$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
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贝恩咨询分析方法ProductLineProfitability
Product Line Profitability
•Potential for Mismanagement
•Failure to tie direct and indirect costs to individual product lines can cause firms to mismanage their businesses.
•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?
•Cost collection:
•Cost assigned to products:
•Typical accounting system
• By function
(e.g. R&D, advertising)
• Cost of goods sold
– direct labor – direct materials
commitment of resources and the returns for their use
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•Bain PLP
• By product line
• All costs, including all
indirect costs – overhead – advertising – distribution
•Key product profitability measure: •Cost allocation method:
•Disadvantage:
• Gross margin
(revenue - cost of goods sold)
• Accounting standards
• Often does not reflect true
Product Line Profitability
•Inappropriate Direct Cost Allocation
•Some accounting systems allocate direct costs to products based on original expectations about production results. These assumptions cannot account for changes in raw materials use and labor time.
• Tracked using
accounting standards
• Variances
sometimes not tracked by product
• All direct costs,
including variances, are tracked by product
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贝恩咨询分析方法ProductLineProfitability
•Accounting standard
•Revenue per widget: •Raw materials:
•$6.00 •$1.75
•Production floor labor:
•0.30 hours x 8.00/hour = $2.40
•Gross margin: •Gross margin percent:
•Gross Margin Versus Operating Margin
•If accounting systems do not allocate all indirect costs to products, managers may misjudge products’ relative contribution to profits.
•Agenda
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贝恩咨询分析方法ProductLineProfitability
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.
•Definition
•Typical accounting •allocation
•PLP •allocation
•Indirect costs
• 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
allocated based on percent of sales
• Allocated based on
actual cost drivers
•Direct costs
• Costs incurred directly
in the production of the product or service. These costs can easily be identified with a particular product