Understanding Customer Profitability To Create Value

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Understanding Customer Profitability To Create
Value

• Bala V. Balachandran
• J.L. Kellogg Distinguished Professor of
• Accounting and Information Systems

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The Current Business Environment
Manufacturing Excellence

• New Products

Demanding Customers
Changing Workforce
Changing Technology
New Competitors
Global Competition
Decreasing Margins
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Levers to Maximize Profit
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Levers to Maximize Profit
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Balas 4Ms

• Measure Both Revenues Costs Correctly (ABC)
• Monitor Movement of Both Revenues Costs
• To Apply 50 Rule
• For Benchmarking
• Rule-I and Cashew nut Rule-II
• continuous Improvement
• Manage For Action Plan
• Yield Management / Revenue Management
• Thru-put Management
• Activity-Based Management
• Process Value Analysis So That We Can
• Maximize Profitability

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Strategic Process Management
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Strategic Process Management
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Strategic Process Management

• Product Innovation/Excellence
• Nike
• Merck
• Sony

Latest Products

• Operational Excellence
• FedEx
• Wal-Mart
• Costco

Operational Excellence
Personal Touch and Feel
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Strategic Profitability Management

• Constancy of Purpose

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Revenue Management
Revenue management is the art and science of
predicting real-time consumer demand at the
micromarket level and optimizing the price and
availability of products." R. G. Cross

• Keenly Observe Buying Behavior of Customers
• Objective of RM is to Sell
• The Right Product to the Right Customer at the
  Right Time for the Right Price

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• C.M. The relentless pursuit to eliminate
  Non-value added activities and optimize
  resource utilization effectively
• and efficiently."
• RM - CM Ensures that companies will sell the
  right product to the right customer at the
  right time for the right price with the right
  cost.
• An integrated set of business processes and
  activities that bring together people, systems,
  knowledge and information with the goal of
  understand-ing the market, anticipating customer
  behavior, responding quickly to exploit
  opportunities effectively and efficiently with
  company's resources, products and services.

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Value Chain Perspective of Business Functions
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Cost Management

• KANTHAL

Bala
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Cost Management
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Value Chain Perspective
Supplier Value Chain
Supplier Channel Value Chain
Firm Value Chain
Buyer Channel Value Chain
Buyer Value Chain

• The End Buyer Pays for Margins Throughout the
  System

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Strategic Cost Management

• Balanced Scorecard

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Building Blocks of the e-Corporation
Supply Chain Management Applications
ERP Backbone
Intranet Applications
eProcurement Applications
Data Mining, Knowledge Mgmt. Apps.
Enterprise Applications Integration
Customer Relationship Management Applications