The Importance of Gross Margin Analysis

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The Importance of Gross Margin Analysis

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The delivery driver arrived with a quantity of specialised bolts.

The receiving company had no workable goods inward system.
The driver walks around the benches of the workers and eventually someone squiggles something illegible on a delivery note and promptly puts the box of specialised bolts under his bench and gets on with his work.

A few days later, 4 workers spend 3 hours looking for the specialised bolts - they cannot be found.
A new set of specialised bolts are ordered and arrive 2 days later. The order is completed and despatched but is now days late. It is part of a refurbishment program for a set of shops.

12 hours of lost labour time later at a cost of £240 plus catch up overtime  and the duplicated cost of a replacement set of bolts at another cost £125 which is  never recovered,  oh a month later the specialised box of bolts was found but as its I was for a one off order and they sit in stock and will never be used again. The margin on the sale had deteriorated but nobody noticed.    

This of course is not fiction but a typical day in the life of a company manufacturing high quality products not managing its P&L properly no focus on margin analysis and failing with its systems. It is of course no surprise the Company was unable to survive the recession, 60 people made redundant the supply chain suffers losses.

All this could have been avoided and a great manufacturing company could have been saved if only some simple analysis had been undertaken.   


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During the last 30 years I have been providing transformational change and supporting growth plans for a range of businesses from SME's through to PLC's.

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