Improve Profit and Loss: Get Directly Involved in S&OP

In a recent survey of companies using advanced S&OP systems, Gartner identified the key characteristics of companies that have reached Stages 4 and 5. The highest performers assign a P&L owner or senior executive to lead the process (see the definitions and a summary on “Gartner S&OP User Survey Lays the Path for Successful S&OP”). The survey doesn’t explain why, but it does provide some clues. For example, it highlights that as they make efforts to mature their S&OP processes, companies struggle to establish a stronger link with business outcomes.

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Three Steps to Mastering Prescriptive Profit Maximization

Profit maximization, or the process by which you determine the price and output level that provides your company with the greatest profit for the fiscal year, is a lot tougher than that simple definition would suggest.

Quick question: How do you measure your profits throughout the year? Do you use the total revenue to total cost model that measures profit as your company’s revenue minus its costs? Or, do you use the marginal revenue to marginal cost model which states that total profit reaches its maximum value where marginal revenue equals marginal cost?

Your approach to measuring profits can have a significant impact on how you go about maximizing profits.

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