Wavin: Water management solutions
Wavin is a Dutch company that has a global impact with relatively simple products (water drainage, water pipes, rainwater drainage, water storage), starting in the 1960s with the manufacture of PVC water pipes.
Since then, the product portfolio has expanded to include complex products for climate control and pipe connections, among other things. In addition to that, there is now a comprehensive catalog of simpler products with specific properties based on the application’s needs (rainwater, tap water, sewage, repairs, etc.).
This has created a need within the supply chain to manage the product portfolio: portfolio management.
Pareto: The 80-20 rule
Portfolio management is about strengthening your product offering in the markets that matter.
That sounds simple enough. Until you realize you carry more than 10,000 products and have over 100,000 customers in over 30 countries. It’s already difficult to track those markets without looking at your products. And it’s just as difficult to implement product improvements without looking at all those markets.
Enter Pareto, the 19th-century scientist, who determined that 80% of the “outcome” comes from 20% of the “causes”.
In the business case: 80% of revenue is generated by 20% of the products. But also: 80% of revenue is generated by 20% of the customers.
Pareto on the product- and customer dimensions
If you combine the Pareto on the customer and product dimensions, you get an interesting distribution of your sales into four bins:
- Customers in the 80% group (sales) who buy products from the 80% group: stars.
- Customers in the 80% group who buy products from the 20% group: cousins.
- Customers in the 20% group, who purchase products from the 80% group: growers.
- Customers in the 20% group, who purchase products from the 20% group: grandmothers.
This analysis can, in turn, be filtered by product group and geographical division to obtain a clearpicture of the division into business units (responsibilities).
Implementation in SAP BW 7.5
This analysis is not easily modeled in standard transformations in SAP BW 7.5, but with the Analytic Processes, it is quite doable.
The Analytic Processes determine daily which products and customers belong to the 80% group (so, if Vilfredo Pareto is correct, this represents approximately 20% of the customers and products). They are fed by BEX Queries.
The customer and product data are enriched with the results, and then revenue (or profitability) can be categorized into the four categories. Strategic Management, Tactical Action
Strategic management, tactical execution
based on this simple analysis, strategic choices can be made (allocation of people and resources), and tactics can be devised, with the goal of moving the growers and nephews to the stars section, increasing the market share of the stars, and dropping the grandmothers if possible.
