“Holy Grail” Contribution Margin Analysis

VIP SOLUTIONS CASE STUDY

Manufacturing

INDUSTRY

4,500

EMPLOYEES

$750M

ANNUAL REVENUE

BACKGROUND

Our client experienced an extraordinary disruption to the business stemming from an ERP implementation across the organization. Following a period of cleaning up and restating 9 months of activity, it became clear that the impacts to the business far exceeded forecasts.

VIP was tasked with developing a contribution margin analysis of all goods sold during the 2021 period in order to better understand what goods drove losses in the period, and why.

PROJECT RESOURCES

OBJECTIVES

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Create standard margin analyses of all products sold

5

Roll up production variances, cost variances, and purchase price variances into the finished goods lots to attribute variances to orders

3

Evaluate over $12M of cycle count variances to isolate drivers and attribute cost to the finished good product lines on a ratable basis

FP&A

Evaluate over/under L&OH by plant to attribute to the finished goods product lines

SOLUTIONS

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Prepared contribution margin analysis that identified three net loss contracts on 25% of monthly revenues

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Conducted contribution margin contraction of 5% across all products, resulting in $44m contraction:

  • Identified significant deficiencies and errors in pricing ($20m)
  • Identified supply chain disruption due to excess market purchasing ($12m)
  • Identified labor & overhead downtime ($12m)

Restated 9 months of activity in 75 days and informed significant business transactions that are expected to result in
$75M EBITDA TURNAROUND IN 2022

STATUS DOCUMENTATION