Nomeco have surprised themselves. In one year, the company has increased its turnover by 9.2% and its profit by 9.8% across 40 product categories. The recipe is targeted and intelligent work with data analysis of product turnover and profit – a recipe that many other companies should adopt.
“I must say I’m really surprised at how big an effect the use of double ABC has had on our category management,” says Nomeco’s Head of Product and Data Management, Dorte Taunø.
We’ve cracked the code for how we can increase both turnover and profit on our 7,000 or so freely traded products (i.e. non-pharmaceutical products)
ABC is a tool for growth
Many companies use double ABC on picking and sales parameters as an effective tool for reducing costs and improving the level of service. Nomeco has chosen a different approach and uses ABC as a proactive tool for generating growth. Read more about growth-oriented ABC
Dorte Taunø and her category managers therefore focus on turnover and profit when analysing their 40 product categories.
The perfect link
Nomeco A/S is a wholesaler for Danish pharmacists and a warehouse for pharmaceutical manufacturers. Nomeco’s Danish division is a wholesaler for approx. 67% of Danish pharmacists and part of the international Phoenix Group. Thus, the company is the perfect link between the pharmaceutical industry, suppliers of freely traded products and pharmacies, and the company works closely with pharmacies on logistics, product range, services, etc.
Focus on generating increased profit
It is therefore a natural development for Nomeco to also establish closer ties with selected suppliers in order to strengthen the overall value chain.
“In 2014, we decided to start using ABC in our work to ensure an active, dynamic and attractive offering of freely traded products to pharmacies.”
The area comprises:
- 40 categories
- 7,000 items
- 350 suppliers
Nomeco is thus expanding the traditional use of ABC, which aims to perform double ABC on the parameters picking and sales.
She adds: “Together with ABC Softwork, we were quickly able to see that the classic ABC analysis did not work for us. Instead, we opted to use an analysis where the objective is to continuously ensure that the pharmacies get very accurate coverage of their needs while we optimise our turnover and profit.”
All product categories are analysed
Dorte Taunø and her team of category managers mapped all products in the ABC model:
Subsequently, the task was simply to shuffle all these products into a more profitable offering.
“Of course, it’s not quite that simple in practice. It requires a lot of different actions for each category, but the strength of ABC is that we get razor-sharp and visual transparency in our product categories,” she says.
The analyses give category managers clear answers to:
- Which products are profitable?
- Which products contribute positively to a category?
- Which suppliers need attention?
Razor-sharp and visual transparency
Every 14 days, the category managers meet to discuss ABC and actions for each category. All categories are monitored in ABC Analyzer and ABC Monitor, and the responsible category manager presents:
- Developments in turnover and profit
- Most and least saleable products/suppliers
- Number of items, which are developing and which are “dead”
- New products and suppliers
“These meetings give us close, continuous monitoring of products and suppliers. We routinely update our plan for the relationship with suppliers, what we need to do, what the supplier needs to do etc.
The great thing is that we have data documentation for everything, and that it’s easy for us to present data to suppliers in a visual and understandable way.
We can show our suppliers in black and white how their products are performing,” says Dorte Taunø, adding:
“That makes it very easy for us to enter into a value-creating dialogue with new suppliers. Immediately, or very quickly, we can put their products in the ABC matrix so that both they and we know how the product is doing. This creates a fantastic basis for dialogue. You might say that we become better at helping suppliers to deliver better price and performance.”
The corners of the growth-oriented ABC analysis get special attention
In Nomeco’s case, CA products are: “Products with low turnover but good profit.” Here, the task is to help the supplier market the product so that the pharmacists are made aware of it.
AC items contrast with products with high turnover but low profit, and here it is the category manager’s job to work with the price to make it more advantageous.
CC items are at risk of being removed from the range unless there are major changes in both profit and turnover.
Results exceed expectations
“The analyses quickly provide us with and accurate overview. We may well have already had many of the insights, but the visual presentation means it is much easier to take concrete actions,” says Dorte Taunø, adding:
“I had expected that we would benefit from the analyses. But I must admit I didn’t expect results as significant as an improvement of almost 10% on both turnover and profit in just one year.
The analyses simply makes it easier for us to increase the profitability of the existing range in a targeted way and ensure satisfactory profitability for new products.”
Nomeco delivers a wide range of freely traded products and pharmaceuticals to Danish pharmacies.
In 2015, a law came into force aiming to increase the availability of medicines. Since then, there have been rapid developments and more than 100 new pharmacy branches have opened, giving consumers increased availability of pharmacy products. This is placing demands on the range of freely traded products that pharmacies have placed in the store/customer sphere. The company is located in Copenhagen and has around 700 employees.
Nomeco is one of four “Best Practice customers 2017”
Every year, ABC Softwork selects 4 strong Danish companies to share their experiences and best practices at a closed event for ABC customers: ABC Breakfast Club. Read the articles about this year’s three other best practice customers: