Posted: March 18th, 2023

Sales Management and Reporting at Chemgrow

Sales Management and Reporting at Chemgrow

The reporting and financial systems at Chemgrow are typical of many process-based manufacturers who are more centered on production efficiencies than on sales reporting and analysis. Inward focused and difficult to change, the reporting systems are crippling the company’s ability to grow profitably. Only through intensive manual analysis can the teams mentioned in the case study get useful information. This lack of reporting capability is crippling the company’s ability to align sales, marketing and service. The integration of sales and marketing strategies is highly dependent on the rapid accessibility of profitability data by customer and sales programs (Goldman, 2005). Not having sales and profit performance data leads many companies to eventually compete on price, sacrificing profitability to gain sales (Vaccaro, 1991).

For Chemgrow, the intensive manual process relied on for producing reports is a competitive disadvantage and one that costs the company profits, valuable selling time, and the ability to react to changes in market conditions quickly. Studies of sales reporting strategies that attain the best results have a sufficient quantity and accuracy of information, have a high level of relevancy and lack bias, yet are above all, are very timely in their reporting and analysis (Wotruba, Mangone, 1979). Chemgrow does not have these attributes associated with their systems and as a result will need significant re-engineer their sales reporting processes first, selectively adding in automation second.

As a first step to redefining the sales reporting process and its associated analytics each sales region is analyzed from a gross margin standpoint and by tonnage shipped. Analysis of individual sales performance is also completed at the gross margin level with the outstanding sales person defined in addition to the top 15 most valuable customers from a gross margin standpoint. This analysis concludes with recommendations for reports that will need to be run periodically for Chemgrow to become more efficient at managing their sales channels to profitability-based goals and objectives. These reports will significantly reduce the firefighting that is occurring throughout the company today and the exceptionally high levels of manual analysis needed to get valuable profitability data to manage sales regions. From a sales planning and control perspective the company has to completely re-orient their approach to creating a sales reporting system. Recommendations for this strategy are also provided.

Three Year Sales Analysis

The Southwestern Region was the most productive by gross margin for the three years of the analysis, generating a revenue average gross margin per sales person of $630. This was computed by taking the average percentage of total sales by salesperson within region and multiplying it by average gross margin. The following table summarizes that data provided in the case.

Average Gross Margin Per Ton (1998-2000)

Ammonia

$14.00

Phosphates

$12.00

Potash

$20.00

Table 1, Average Percentage of Total Sales for Each Salesperson summarized percentage of total sales by salesperson, by product within region. When the average gross margin per ton is applied to these figures, the Southwest region has the highest productivity on average for gross margin. Holden is the most outstanding salesperson on gross margin earned.

Table 1: Average Percentage of Total Sales for Each Salesperson (%)

Ammonia

Phosphates

Potash

Region Percentage

Eastern

McFee

60

35

5

Collam

5

20

75

Park

80

10

10

Dows

0

0

Region Averages

61.25

16.25

22.5

Revenue Average

$857.50

$195.00

$450.00

$500.83

Central

Thums

80

20

0

Cook

25

50

25

Block

20

30

50

Flower

75

20

5

Region Averages

50

30

20

Revenue Average

$700.00

$360.00

$400.00

$486.67

Northwest

Vans

70

20

10

Sciffman

65

20

15

Lukebore

80

10

10

Wilkie

20

10

70

Region Averages

58.75

15

26.25

Revenue Average

$822.50

$180.00

$525.00

$509.17

Southwest

Goodie

5

5

90

Stubber

5

15

80

Holden

0

0

Macke

10

20

70

Region Averages

5

10

85

Revenue Average

$70.00

$120.00

$1,700.00

$630.00

Assumption:

Average Gross Margin Per Ton (1998-2000)

Ammonia

$14.00

Phosphates

$12.00

Potash

$20.00

Tonnage across all regions for the three years was next calculated based on the Exhibits in the case study. Figure 2: Total Tonnage Analysis provides a three-year breakout including the four quarters of 2000 as defined in the case study. The Southwest region leads in total tonnage with 395,507.

Figure 2: Total Tonnage Analysis

1 rst Qtr

2nd qtr

3rd qtr

4th qtr

Total Tonnage

Region

Sales 98

Sales 99

2000

2000

2000

2000

Eastern

107,747

115,373

36,440

51,726

21,446

14,144

346,876

Central

126,372

95,880

28,085

50,941

13,710

18,274

333,262

Northwest

106,750

102,609

40,758

58,862

29,016

15,664

353,659

Southwest

124,448

110,165

51,826

77,017

17,292

14,759

395,507

When all four regions are analyzed to see who the top 15 accounts are, the confusion that Chemgrow has related to its sales reporting becomes apparent. The eighth most profitable account, FSC is sold to by both Collam and Dow out of the Eastern Region. Yet the confusion becomes even more pronounced when the most profitable customer is determined. Mack from the Southwest Region and Vans & Wilkie from the Northwest Region all sell to CF. To have just looked at customer profitability purely from a region standpoint would have been to miss the largest customer in terms of profitability. The following short table illustrates how the profits by region and salesman for CF are distributed.

CF Account Profitability

Southwest

Macko

$443,726.85

Northwest

Vans

$288,204.00

Northwest

Wilkie

$159,432.00

The entire data set from all four exhibits for each region were grouped into a single database and analyzed to see if there was consolidation of profits that would bring a customer into the top 15 ranking. The results of this analysis are shown below. The consolidation margin figure in Figure 3 is computed using$15.33 and is derived by taking the margins from Ammonia, Phosphates and Potash combined.

Average Gross Margin Per Ton (1998-2000)

Ammonia

$14.00

Phosphates

$12.00

Potash

$20.00

Consolidated Margin

$15.33

Figure 3: Consolidated Margin Analysis

REGION

SALESPERSON

CUSTOMER

Consolidated Margin

Southwest

Macko

CF CONSOLDIATED

$891,362.54

Southwest

Goodie

RGC

$800,854.53

Eastern

Collam

MFS

$654,667.65

Southwest

Goodie

GFF

$643,093.50

Northwest

Wilkie

CI

$620,405.10

Central

Thums

YF

$601,901.79

Central

Block

WDB

$460,927.11

Eastern

Collam

FSC CONSOLIDATED

$457,830.45

Eastern

Collam

MFS

$453,951.96

Southwest

Macko

CF

$443,726.85

Southwest

Goodie

PGC

$435,326.01

Eastern

McFee

LAS

$433,210.47

Central

Block

LFS

$427,691.67

Southwest

Stubber

GCC

$414,691.83

Central

Cook

JC

$411,993.75

Automating the Sales Reporting Process

From the analysis completed for this case study it is evident that Chemgrow needs to first align their sales and profitability reporting first by customer, second by region and third by salesperson. The use of tonnage as the primary measure of sales efficiency tends to aggregate variations in product mix further making more precise analysis difficult. There is also a lack of clarity on how margins change over years, which always happens in a process industry that Chemgrow competes in.

The computer reports that the management team at Chemgrow need to develop and regularly use include the following. First, profitability analysis by customer that shows what the net profitability contribution is of a given customer based on their mix of products ordered. This report would be the consolidated view of all sales activity and would be run monthly. The second report is sales and profitability analysis by salesman. This would provide management with a short summary of the level of profits generated monthly by salesperson in their key accounts and also show how far they are from their quotas. This report would also be organized into region as well. The third report would be sales effectiveness analysis, and this would be a report showing how each salesperson is distributing their sales across the various products. This would given senior management the insight into guiding members of the sales teams to focus on shifting their selling mix.

References

Larry Goldman. (2005). Driving Toward Action: Marketing & Sales Alignment. DM Review, 15(6), 55.

Vaccaro, Joseph P. (1991). Organizational Issues in Sales Force Decisions. Journal of Professional Services Marketing, 6(2), 69.

Wotruba, Thomas R., & Mangone, Richard. (1979). More Effective Sales Force Reporting. Industrial Marketing Management, 8(3), 236.

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