The short answer to price pressure? Understanding margins. This does immediately raise a follow-up question. Because how do you still make margins when prices are maximally transparent and customers can see exactly how much they are paying for what? Orders of one come next to full pallet orders. These different logistics flows make the handling costs customer-specific. Which in turn increases the cost per process.
Understanding margins is a challenge for wholesale businesses. Sales price and fixed costs are variable, and the increasing sales flows and units in which you sell make it complex. What costs fall under what type of order? How do you factor transportation costs and free shipping into your margin calculations?
Wholesale companies used to make discount agreements at a certain, annual order value. Increasingly, we see that the discount is incorporated directly into the price, which in turn affects the margin. In addition, pre-financing is decreasing all the time. The changing times make margin the magic word to stay profitable.
SAP has smart solutions for wholesale companies to perform margin analysis and calculations: The SAC dashboard developed to drive margin based on value drivers.
With this, costs can be linked to individual sales. This is done using the profitibitly analyses conditions (static conditions in COPA). Take for example transportation costs or VAS activities: for some orders you may pass these on to the customer, for some you may not. This allows all costs to be related to a vendor order. You want to know on which order you are making the most margin on. This becomes insightful with McCoy's SAC dashboard, so you can investigate where margin is leaking away.
Is your wholesale business looking to improve margins? Send our experts an email at firstname.lastname@example.org and schedule a one-on-one 30-minute appointment to get you started.