Arena Consulting Group
Value Capture - The reason we exist
Value Capture is getting a return for the investment you’ve made. Our goal is always to return 10X your investment in the next 18 months.
But Value Capture does more than just get the return you deserve from the project. We typically set the Value Capture goal at the outset of the initiative. This does several things for the team:
- It assures that the project’s goals are clear
- It assures that there is adequate justification for moving forward
- It obtains and maintains management attention over the life of the project
- It maintains a positive pressure on the consulting and internal team to deliver results
While every company’s opportunities will be different, Value Capture results typically come from four key areas:
One Version Of The Truth (Category Management)We find very little consensus across the companies that we work with on which products and customers truly make money for the enterprise. If you can’t agree on or measure the results, you can do very little to control them. The reason is that under Gross Margin everything looks the same (they all look profitable). Arena’s ABC methodology gets everyone on the same page as to the true net profitability of categories, SKUs, Customers and Vendors within the organization. This agreement is powerful. Once gained, the company can move quickly to determine strategically which categories are important for them to compete in, generate profits, or have loss leaders.
Trading Partner Negotiations
Ninety percent of our customers use our services for this reason alone. After we’ve created One Version Of The Truth above, it becomes very clear which are the most and least profitable Vendors and Customers for the company. This sets the stage for aggressive negotiation and ABC creates a common language based on the activities each trading partners performs. This is negotiation based on fact.....not rounds of free golf, gut feel or gross margin.
SKU and Service Optimization
An average grocery retailer has 80,000 SKUs on the shelf. Accounts like Lowe’s have 180,000. Additionally, there are 20,000 new products introduced every year in grocery and only 2,000 survive more than a year. Knowing which ones to keep and which to throw away is a key to profitability. “Optimization” does not necessarily mean elimination. There are several steps before deletion, including: re-pricing, renegotiation with the vendor and reengineering the fulfillment process. The trick is in knowing which SKUs to address while getting the organization to execute.
Benchmarking / Re-engineering Internal Supply Chain Costs
We ID not only the profitability of Categories, SKUs, Customers and Vendors, but also the internal processes that drive these costs. Once identified and measured, they can be re-engineered to make them as efficient as possible. This can be done with new technologies or practices, and is often done in cooperation with the vendor or customer. Most of our clients also use this information to benchmark the performance of similar functions across the enterprise.