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REVENUE ENHANCEMENT SERVICES CREDENTIAL SERVICE OFFERING: Customer Profitability Study CLIENT: Electrical Components Distributor AA OFFICE: Philadelphia INDUSTRY: Distribution ENGAGEMENT PARTNER: Patrick J. McCormick REVENUES: $500 million OFFICE: Philadelphia PHONE: 215-241-8297 ENGAGEMENT MANAGER: Joy M. Janice OFFICE: Philadelphia PHONE: 215-241-7426 ENGAGEMENT DESCRIPTION: This client is a large national distributor of electrical components and equipment which serves electrical utilities, industrial, and construction markets. The sales effort was directed at purchasing departments of electrical utilities and power plants, as well as construction contractors and industrial/manufacturing firms. The market power of suppliers and customers limited the client’s profits. Thus, the company competed on the breadth of its product line, ease and convenience of ordering, and special pricing arrangements which were passed on to end customers. Arthur Andersen was engaged to improve the profitability of individual branch offices, reduce inventories, improve the distribution process, and start the process of sharing best practices of branches throughout the United States. PROJECT APPROACH/WORKSTEPS: Arthur Andersen approached the engagement in the following manner: 1. Conducted structured interviews with branch personnel at selected high-profitability branches to understand internal activities, roles and responsibilities, the company’s customer base, and success factors. 2. Developed customer profitability computer models and inventory turns/product profiles clearly showing the profitable and unprofitable combinations of customers and products. This allowed the branches to better manage their sales efforts and make more strategic choices of customers and products. 3. Developed process maps and cross-functional cost and activity analyses of the sales, administrative, order processing, and purchasing activities to uncover inefficiencies that could be corrected with bet