Keeping a Pulse on Profit: Understanding the Power of the Variable Contribution Margin in Manufacturing
The variable contribution margin (VCM) is a powerful tool – to unlock its full potential, manufacturers need to know how to use it.
VCM analysis is a different way of looking at profitability; it evaluates each individual product in depth to uncover fundamental business insights, including the amount of resources dedicated to a product, how much it contributes to overhead costs and the profit it generates. When VCM analysis is evaluated in tandem with the stock-keeping unit (SKU), executives begin to develop a more accurate financial picture of their business, allowing them to make smarter, more strategic decisions. A tool like Salesforce’s Manufacturing Cloud can be leveraged to make the process of classifying costs and conducting financial analysis effortless - improving a company’s bottom line.
This white paper also explores:
- Critical considerations regarding how to proceed with an unprofitable product
- Considerations related to pricing
- Increasing the profitability of a product
- Negotiating less expensive raw materials from suppliers
- Identifying when to cut your losses