RESULTS: How Achieved   >   Profit Analysis

    Enlarge Profitability Diagram
  • Bottom-line profitability is (or should be!) the most important measurement for any business, for without it, the business will cease to exist. Bottom-line awareness does (or should) inform nearly every business process, strategic or tactical initiative, staffing decision, capital expenditure… everything the company does.
  • Most mid to large size companies nowadays understand their bottom-line in aggregate for the total company, and their gross margin for all of their customers and products. This is because modern ERP systems do a fantastic job of capturing revenue and direct costs for every transaction and therefore every segment of the business. However, getting a handle on Net Operating Profit (NOP) at this same level of detail often remains elusive. ERP systems are not built to capture the linkages between partners and products and the operating expenses required to support them, which are indirect.
  • The VDDW framework addresses this issue. It exposes NOP, and even deeper, economic profit (NOPAT less Opportunity Cost of Capital consumed), for every slice of the business: by customer, by supplier, by product or service, by channel, by location, even down to each and every line-item transaction. In so doing, it provides complete, ad hoc visibility into bottom-line performance, any which way the user want to slice it, and therefore serves as the hub for Performance Management Intelligence.
  • The diagram to the right illustrates how the VDDW approach displays these critical measures.