Distributors kpi
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Distributors Cost+ remuneration model. Transparent, fair and competitive

Distributors Cost+ remuneration model. Transparent, fair and competitive

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Distributors kpi Presentation Transcript

  • 1. BUSINESS PARTNER COST + MODEL Lansana Sakho Managing Director http//www.experts-visions.com [email_address] “ The partnership is two way street. You’re depending on the partner to supply the expertise you lack” Cynthia Griffin, American Business Journalist
  • 2.
    • Ensure that the distributors remuneration bears a direct relationship to the relevant costs & investment incurred in fulfilling the business.
    • Enable recognition of achievement in key focus areas.
    • Ensure equitable remuneration of all distributors.
    THE FUNDAMENTAL PRINCIPLES
  • 3.
    • Identify the services required to achieve the business.
    • Identify the structure required to deliver the services.
    • Determine the cost of the identified structure and services.
    • To ensure that the distributor basic profit, is relative to the cost incurred.
    • Determine Sales level for calculating %.
    5 EASY STEPS
  • 4.
    • Identify the services required to achieve the business.
      • National Sales, Customer / Consumer Marketing.
      • National distribution.
      • Warehousing & Stock holding.
      • Inbound logistics.
      • Outbound Trading Terms.
      • Reporting.
    • Identify what the business needs, not what is currently available.
    STEP 1 RELEVANT COSTS
  • 5.
    • Identify the structure required deliver the services.
      • Admin Structure & services.
      • Warehouse Structure & services.
      • National delivery to trade structure (Internal or 3 rd party).
      • Sales Force structure (incl. vehicles)
    • Identify what the business needs, not what is currently available.
    STEP 2 RELEVANT COSTS
  • 6.
    • Determine the cost of the identified structure and services.
      • Variable Costs
      • Variable Financial Costs
      • Fixed Costs
      • Business support funds (Duty payable, GtN, etc)
    • Identify Business proportion with regard to a shared structure.
    STEP 3 COSTS – DIRECT RELATIONSHIP
  • 7.
    • Those costs that are directly variable according to the level of activity.
      • National distribution costs
      • Clearing and forwarding costs.
      • Cost of agreed stock holding (30days)
      • Cost of sourcing Forex for imports.
    • The costs are determined on a per unit basis and will fluctuate from period to period, based on the agreed sales level.
    • The costs are based on the agreed sales level and the agreed interest rate.
    VARIABLE COSTS
  • 8. VARIABLE COSTS Example of variable costs
  • 9.
    • Those costs that usually relate to the business structure, i.e. are not determined by the level of sales.
      • Admin Structure & Cost of admin services.
      • Logistics Structure & Cost of services.
      • Sales Structure & Cost of sales services.
      • (Includes the cost of vehicles)
    • The costs are based on the agreed structure and are proportioned based on shared services.
    FIXED COSTS
  • 10.
    • Funds that are provided by to enable fulfillment of objectives.
      • Funds to facilitate consumer marketing activities.
    • These funds are non-profit generating for the distributors
    • Essentially, the Business Support Funds do not relate to services provided by the distributor and are therefore not profit generating.
    • Secondly, in most cases they are investments in sales growth, which assists the distributor in achieving the targets.
    BUSINESS SUPPORT FUNDS
  • 11.
    • Based on the costs derived from both the structure and the services provided, remunerate the distri-butor based on a mark-up on the determined cost,
      • e.g. Cost + 10%.
    • The principle is that : remunerate the distributor based on services provided.
    BASIC PROFIT
  • 12.
    • Budget or Forecast or Actual Sales ?
    • The question is fundamental, as the cost relative to the sales generates the %.
    • Low Sales (Budget) = High %
      • Over achievement = over recovery of fixed costs.
    • High Sales (Forecast) = Low %
      • Under achievement = non-recovery of costs.
    • To be reviewed on a regular basis – Quarterly .
    COMMISSION STEP 5
  • 13.
    • Budget or Forecast or Actual Sales ?
    • Stable volume markets
      • Sales = Average of Last 3 months Actual.
      • Offers opportunity for over achievement > Improved profits
      • Focuses effort on sales to avoid under recovery.
    • Unstable volume markets (Growing or declining)
      • Sales = Best estimate for forward period.
      • Focuses effort on sales to avoid under recovery.
      • Offers reasonable opportunity for over achievement > Improved profits
    AMED Sales Conference 2004 COMMISSION Recommendation
  • 14.
    • Response to significant on-going under achievement?
    • This will lead to under recovery of costs.
      • Implication = Higher Mark-up% required.
    • Appropriate Response
      • Review sales performance to determine potential.
      • Review costs and implement revisions to structure as needed.
    COMMISSION Recommendation
  • 15. AMED Sales Conference 2004
  • 16. AMED Sales Conference 2004
  • 17.
    • The Cost+ model is not a suitable incentive for distributors.
      • There is no incentive to reduce cost.
      • The profit does not reward growth.
    • Therefore having covered the costs & basic profitability, achievement of KPIs will generate additional profitability on classic pay-for performance principles.
    • The total profit should be structured to ensure a profit relative to the distributor’s investment in the business
    ADDITIONAL PROFIT > KPIs
  • 18.
    • The structure of the reward is such that when combined with the Cost+ profit, achievement of KPI’s at 100% will generate a total profit of 3% of Sales.
    • As per the principles of EICP, achievement can increase to 120%, further rewarding exceptional performance.
    • The KPI’s are linked to the Subsidiary casita.
    ADDITIONAL PROFIT > KPIs
  • 19.
    • The Cost+ Model
    • links additional profitability to achievement of defined KPIs.
    • Ensures equitable remuneration of distributors.
    • Enables recognition of cost differences in different markets
    • Ensures equitable remuneration based on performance through a combination of basic profit and KPI achievement.
    THE FUNDAMENTAL PRINCIPLE
  • 20. DISTRIBUTOR COST+ MODEL
    • Transparent,
    • Fair,
    • and Rewarding
    • remuneration
    • for Distributors
    • A BUSINESS Win/Win!