Articles
Profitable Category Management By Jack Haedicke, Arena Consulting Group
May 15, 2006
Click Here To Download:•Article: Profitable Category Management
For years, Activity Based Costing (ABC) has been shown to benefit retailers in many areas — Cost Reductions, Partner Negotiations, Benchmarking and Process Changes — but Category Management is, perhaps, ABC's highest calling for a retailer. Category Management defines how a retailer differentiates from other retailers, both with the items on the shelf and how they're priced. It dictates what gets promoted. It's the image presented to the consumer, and may even decide to which consumers it's presented. It can even define how the retailer negotiates with vendors.
This article is intended to illustrate how ABC is employed as the key enabler of the Category Management process and, by association, Category Management's key tactics of Competitive Category Management, Pricing Optimization, Efficient Assortment and Market Basket Profitability.
This article is not intended to discuss how ABC is implemented at a retailer or manufacturer. There are more than enough articles to describe that process. It is imperative, however, that whatever ABC system is implemented, it must be able to determine "net" profitability at the SKU (stock keeping unit, or item) level, be simple in structure and be designed by the users themselves.
And, while the retailer that is typically responsible for executing on Category Management strategies, the manufacturer or vendor will also benefit from a better understanding of how retailers choose to position products to build profitable revenue increases. It is, quite simply, in both the retailer's and the manufacturer's best interest to jointly work towards any solution that provides the greatest value to the consumer. ABC and Category Management provide the framework and language by which they can collaborate.
Click Here To Download:•Article: Profitable Category Management
Jack Haedicke bears the distinction of having built more activity based costing (ABC) systems than any other single individual. As controller of manufacturing at Hughes Aircraft, he developed customer profitability models. He led the US efficient customer response (ECR) initiative while serving as director of cost accounting at Coca-Cola, and he later held the position of vice president of finance and supply chain at Kraft Foods, With consulting firm Arena CG, Haedicke has built customer profitability-focused activity based costing systems for Miller Brewing, Wegman's, Wal-Mart and Target.
Arena Consulting specializes on the interaction of cost accounting and supply chain in the areas of (ROI) Return on Investment, Pricing, CPFR (Collaborative Planning, Forecasting and Replenishment), ABC (Activity Based Costing), and Consolidation Warehousing.
