Tevo, a South African business specialising in innovative products, now benefits from more accurate profit calculations. These are used for an improved understanding of their value chain and therefore better decision-making to secure their competitive advantage.
These benefits flow from a sophisticated solution designed by Keyrus to calculate contribution margin values. Keyrus has a proven track record in understanding the components of profitability in the retail industry and applying reputable, modern and scalable technology.
The challenge
Tevo sources, develops, markets and distributes innovative, quality products that enhance its end customers’ experience. The business required enriched sales and cost data to ascertain its net product cost accurately. This information is critical in driving their pricing and promotional strategies.
“It is imperative for us in the retail industry to understand gross profit, but it is not enough to stop there,” says Jared Davey, Business Intelligence Manager at Tevo. “We also need detailed insight into all the other costs associated with selling a product to an end-user.”
A key metric for the business is how much profit it will make on each stock-keeping unit (SKU) or product. This can only be accomplished by accounting for a range of variables that, in the past, Tevo could not accurately factor into its profit calculations. The distributor needed to be able to calculate contribution margins.
The solution
Keyrus has a long-standing working relationship with Tevo and was engaged to design a solution.
“Once we had decided which key variables needed to be included in the contribution margin calculation, we determined how to bring each of those metrics into the model,” explains Nathi Xulu, Head of Data Engineering & Principal Consultant at Keyrus.
This required extensive collaboration between key internal Tevo stakeholders, an outside vendor that assists with the organisation’s payroll system and Keyrus.
Once this was set up, Keyrus designed a solution involving SQL Server Integration Services (SSIS) and an SQL Server database-driven LOB system. This data is then transformed and combined, using Transact-SQL (T-SQL) scripts and SSIS, before being loaded into SQL Server Analysis Services (SSAS) cubes, where it is accessed by various BI tools.
Tevo’s senior stakeholders currently use Excel as the reporting tool to analyse the information.
Benefits
“Now that we can accurately see the contribution margin values, we are able to obtain a comprehensive picture of all the costs associated with selling products to our end-users,” says Davey. “We have accurate insight into the profit we make on each SKU sale. Furthermore, our product managers now have more precise information when negotiating deals with the retailers.”
Accurate profit calculations are extremely important and influence various types of decision-making across the organisation. Tevo can now answer questions such as: Should we continue selling that particular SKU? Or should we reduce or increase the price of a particular SKU?
The solution has equipped Tevo’s analytics team to analyse the variables that can now be calculated and incorporate them into the model.
“For example, we can now better understand the correlation between how much we spend on the salaries of the sales staff in stores trying to promote products versus the actual sales of those products,” says Davey. “We are also better equipped to answer questions around rebate performance, as well as how other variables such as warehousing and distribution influence the overall performance of our profits.”
Xulu concludes: “We admire Tevo’s drive for innovation and their ambition to deliver the best value and quality to the end consumer. Speedy and effective data processing and accurate reporting now give them a detailed understanding of their value chain to secure their competitive advantage.”
Keyrus prides itself on its hands-on approach and focuses on making customers’ data matter. Its global reach enables it to draw on the experience of its international teams of experts. The company's overall purpose is to help customers enhance their performance through transformation enabled by their data, essentially to make data matter.
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