Interview: “Growing gross margin requires a change of focus”
November 23, 2017 Balancing, NEWS Interview: “Growing gross margin requires a change of focus” Interview with Bas Geerdes, Manager of Product Services Sales at Uniper Benelux. Uniper Benelux is now monitoring, evaluating and correcting the pricing within their current energy contracts during and even prior to the run-time of these contracts. How did this effect your overall gross-margin?
First, this constant monitoring allows us to better match our predicted to our realized margin. This way, we enable our colleagues at Finance to substantially decrease the level of uncertainty in their financial balances. But second, we now also know why the realized margin will vary from the predicted margin. Based on these insights, we are improving our pricing within or even prior to the run-time of an existing contract.
Can you give an example of how your closer monitoring results in better pricing, and in the end, higher gross margins?
For example, we can highlight contracts in which essential conditions (number of connections or changes to the contractual period) vary from their original status at the date of signing. These mutations will most certainly cause a delta between contracted and realized volume. Before, we would have only found out about this after realization. Now, we can take appropriate measures and adjust these contracts even prior to their run-time. This way, we avoid these deltas.
In short, we have not only become better at predicting our margins, but also growing them. We are now able to pro-actively manage our portfolio “bottom-up”, from connection level all the way up to our total portfolio.
What did it take to realize this margin growth?
Apart from working with the Energy21 Pricing Circle, we had to change our focus in order to realize the above. Instead of concentrating at realized volumes at the end-date of a contract, our organization is turning its focus towards pro-actively managing contracts.
To be able to manage your portfolio “bottom-up”, you need to increase your information at connection level. So, our Sales colleagues are now providing more detailed information when they present a new customer. This extra administrative effort has resulted in a considerable increase of intelligence, control and predictability of our total gross margin.
Interested to hear more?
Contact Freek Venneman, Lead Consultant Gross Margin Optimization via +31 6 5258 99 90, or contact Energy21.