1. Tilting the Playing Field Strategy for 2015-2016

2. Today’s Purpose suggest a strategic direction for 2015 synthesis of information from our experience and analysis shaped by outstanding results discuss a new strategy

3. Introduction Randy MacLean President of WayPoint Analytics invented new costing models & new profit metrics for distribution monitor & advise on over $60B WayPoint clients’ NBT gain: +174% author of books & articles

5. Concepts

6. Trading Customers “the market leader is the company with the lion’s share of the profitable accounts” ― Bruce Merrifield

7. Trading Customers customers Us Them

8. How Money is Made Really!

9. How Money Is Made 9 $GP $CTS

10. What Makes Gross Profit $revenue margin% fees $GP =X +

11. orderspicks invoicesdeliveries What Drives Cost-to-Serve $CTS ≈

12. $revenue margin% add-on fees orderspicksinvoicesdeliveries

13. How Money Is Made 13 Bottom Line $5$7$3

14. How Money Is Made 14 Bottom Line ($50)$10($25)

15. Whale Curve

16. PIP (Peak Internal Profit) $5.5M Realization 27%

17. 17 Customer Cross-Subsidies

18. entire basis of current business operations good customers support their dysfunctional competitors hidden by accounting systems: competitors without WayPoint can’t see this would you say this to a great customer…?

19. Pricing

20. Stokes MerrillMillennium Revenue$272,743Revenue$261,580 Gross Profit$57,703 22.1% Gross Profit$43,161 15.8% Selling Exp$4,454Selling Exp$3,589 Order Entry Exp$1,611 3 orders / week Order Entry Exp$1,243 2 orders / week Whse Exp$38,212 762 picks Whse Exp$21,212 423 picks Delivery Exp$8,516 4 deliveries / wk Delivery Exp$5,076 2.5 deliveries / wk G & A$10,279 3 invoices / wk G & A$7,709 2 invoices / wk Cost-to-Serve$63,072 23.1% Cost-to-Serve$38,83114.8% NBC($5,369)NBC$4,331 Can Confer Price Advantage

21. 21 Customer Cross-Subsidies

22. Competitor’s Whale Curve

23. New Strategy

24. Objectives have all the most profitable accounts have no unprofitable accounts deliver the best customer experience have a significant price advantage lead in profitability reward contributors

25. Strategy: Road Map 1.reform or trade profit drain accounts 2.reduce transaction counts (CTS) 3.build price advantage by reducing cross-subsidies 4.aggressively pursue target most profitable accounts with using service and pricing

26. Strategy: Steps 5.reduce margin-support policies and actively trade GM% for CTS% 6.incent by profit to motivate and share gains (extraordinary pay for extraordinary profit performance) 7.build GP with intelligent pricing and add-ons 8.build a better breed of customer

27. Competitors’ Limiting Beliefs every sale adds increment to bottom line must win every account GM% = profit, therefore margins must be defended (lower margins will hurt profits)

28. Strategy: End State 50%-75%+ of the most efficient (profitable) customers in the market profit generation 2x industry rates at margins 5%-10% below market market-leading concierge service and corresponding reputation

29. Conclusion use what we know about profit mechanics new action on cross-subsidies tilt the playing field: get the best accounts trade off money losers