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Finding Your Way to a Healthy Bottom Line: Applying Geospatial Visualization to your Aftermarket Business
Written by justinholmanPosted on May 2, 2017 December 6, 2017 Leave a comment
A severe outbreak of cholera was ravaging the Soho neighborhood of London during the summer of 1854. While city leaders and health officials struggled to determine the source of the outbreak, a physician named John Snow had a groundbreaking idea: he used a map of the neighborhood to plot cases of cholera. Ultimately, his method not only revealed the source of the outbreak, but also provided new information about the nature of the disease itself.
Data mapping photograph
Dr. Snow's work is often considered to be the founding event in modern epidemiology. For me, it's also a great illustration of the power of a simple map and its ability to illuminate patterns in data. Much like the citizens of London, business analysts throughout the world struggle to understand and diagnose pain points in their businesses. Why are we having trouble keeping SKU# 123 in stock in Morgantown, West Virginia? How can we minimize the cost of getting parts to installers in Wyoming? How can we avoid costly product returns? Sound familiar?
Unfortunately, maps are not included in the toolboxes of most business analysts. Instead, they stare at rows and columns of data on a spreadsheet, trying to find a needle in a haystack. Even if they do manage to find that needle, communicating their finding or idea may require colleagues with very different areas of expertise to stare at the same rows and columns. Can you imagine a group of military leaders standing around a table staring at a pile of spreadsheets?
board room geospacial planning
Thankfully they, like epidemiologists, integrate maps into their strategic plans. So why do most businesses run almost exclusively on spreadsheets? Of course, spreadsheets are a great tool for in-depth reviews of financial data, and it certainly wouldn't be wise to scrap them altogether. However, complementing spreadsheets with maps (and other data-rich graphics) will provide two very important benefits:
Maps will help illuminate patterns in the data that can't be found in spreadsheets.
Maps allow everyone to contribute to the analysis and the discussion.
A real-life example from my own work might help to illustrate the full impact of these benefits. As consultants for a national distribution company, my colleague and I were trying to figure out how to optimize the configuration of branch locations in the Atlanta market. The goal was to simultaneously maximize revenue while minimizing delivery times and transportation costs. On the company's end, the task force included the CEO, VP of Finance, Regional Manager, several Salespeople, and several Branch Managers.
The chief concern was that, although revenue was strong, profit margins were too thin and needed to improve. So our meeting kicked off with a review of each branch location's financial performance. The VP of Finance and Regional Manager ran through PowerPoint slides comparing revenues and profits, EBIT and EBITDA, COGS and SG&A – the full battery of financial acronyms. They concluded with recommendations about which branches should be retained or closed based on historical performance. The Salespeople and Branch Managers didn't seem pleased with the direction of the discussion, but when asked for their comments they didn't have much to say. Meanwhile, the CEO was frustrated by their lack of input and enthusiasm.
After a short break, my colleague and I were asked to present our analysis. We had prepared several maps, including one summarizing delivery activity for the previous fiscal year. This map showed the source branch locations and the destination of all deliveries by ZIP code. In comparison, we also showed a map with the same data optimized for delivery efficiency and a reduced number of branches. original business intelligence dataGeo-spacial optimization
You could practically hear the gasp when we showed these maps, and the discussion really got going. It turned out that a new branch manager incentive program, which focused on revenue instead of profit, unintentionally incented each branch to keep as much delivery business as possible. Instead of cooperating, each branch delivered all over the Atlanta market. The result was high delivery costs and long delivery times (if you've ever driven in Atlanta traffic you'll know what a difference a couple miles makes).
These costs were just another line on the income statement, and didn't stand out much during the financial reviews because they were relatively similar for all branches. However, our maps illustrated the problem plainly and clearly. Rather than distracting from the overall message by focusing on the exact number of shipments and dollars, a good map helps you cut to the chase and focus on the big picture.
And perhaps even more importantly, a clear, concise map makes everyone feel comfortable participating in the discussion. In our experience in Atlanta, the "boots on the ground" – the salespeople and branch managers – had valuable insights into the local market, but no one wanted to look stupid because they weren't sure how to pronounce EBITDA. With a map on the wall, the branch manager stood before the CEO and told him in no uncertain terms why his branch was losing money and how it could be fixed.
In the end, a geographical perspective helped our client save $3 million per year that would accrue directly to the bottom line, and it empowered salespeople to show management the pockets of demand that they'd been preaching about for years. As our customers in the automotive aftermarket continue to face the challenges of narrowing margins, parts proliferation, high freight and delivery costs, and more, we encourage you to consider: What could a good map do for the health of your business?
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