Customer Profitability

[Supply Chain Novice]

I am trying to get my business to come away from the old saying "there is no such thing as a bad sale". I am sure some of my customers are not profitable but how do I go about proving the point to the management team?

[Split Case]

I would start off by looking at the total volume of sales pa by customer. Then what is the average sales value per order, by customer. That will be a shock to start with!

The next step would be to start looking at the costs associated with each customer, and hence what the margin per customer really is.

[Rocky]

First basic step would to do a Pareto of sales by customer.

i.e.
list average order value by customer.
Sort high to low.
create a graph with cummulative sales.

Usually done with total annual sales per customer, but in this case sales per order will tell you more.

[Supply Chain Novice]

But I would find it difficult to find out what costs are associated with a customer won't I, how would I split it up to come up with an accurate figure?

[COD]

What you are really tackling about here, is getting into cost-to-serve. More and more companies are realising the benefits. Not alot is written about it sadly. If you do a web search all you get in consultant promo material.There is a bit in this thread.

Cost To Serve