Conducting Gross Margin Root Cause Analysis with Power BI
The Situation
A $1B manufacturer of car wash equipment and chemicals and portfolio company of a $16B private equity fund required a fast and deep view of their financial performance. The Company had grown their top line rapidly, yet profitability had not kept up with revenue growth – and it lacked a clear explanation for the margin degradation. After a long history of acquisitions, the Company had multiple unintegrated ERPs and a complicated accounting architecture, which made customer and product level profitability analysis difficult. Accordion was tasked with producing an analysis for the board and management team to explain the root cause of the Company’s underperforming margins.
Services
Business Intelligence & Big Data Analytics
Management & Stakeholder Reporting
Strategic Decision Support
The Execution
•Worked closely with the Company’s CFO, FP&A team and site level controllers to quickly understand the businesses’ system architecture.
•Together with the Company’s CFO, built a framework by which year-over-year profitability measures should be assessed.
•Created comprehensive mapping across business unit accounts in order to bucket costs into clear, uniform categories.
•Built a data model in Power BI, integrating standard costs and purchase price variances by part / customer across accounting systems.
•Created business unit, customer, product line, and part level profitability analysis to help management drill down into the main sources of cost inefficiencies.
•Prepared a comprehensive presentation for the management team, board of directors, and financial sponsor to highlight the key sources of margin degradation on a YTD basis.
•Updated analysis post-engagement end to capture most recent available financials as well as inform business leaders on progress since taking steps to address profitability.
The Results
Accordion produced an analysis that delivered close to real-time visibility into pricing and cost trends affecting the business. Despite a complex data environment with many disparate systems, our team was able to create actionable analytics which the Company had been unable to produce. With Accordion’s solution, the Company was able to swiftly address both the cost inflation and pricing aspects that were impacting their profitability.