Consultingt Techniques - Management Consulting Tools, Techniques, and Frameworks

Management Consulting
Tools, Techniques and

Frameworks
Practical guide with cases and exercises
1
In business you have to make a lot of important decisions
Time and again you will come across problems that are seeming unsolvable. In many
cases you don’t even know how to approach them… 2
In business you have to make a lot of important decisions
Luckily, there are a lot of nice management consulting tools, techniques

and frameworks that will help you solve problems. 3
This presentation will show you techniques that
will help you solve problems on the level of top
management consultants
4
How the presentation is
organized
5
Management consulting techniques and frameworks come in handy both at work
as well as in private life. In this presentation you will see examples from both 6
I have divided the techniques and frameworks in 3 groups
Intermediate
Basic techniques and Advanced techniques
techniques and
frameworks and frameworks
frameworks
7
What you will see in this presentation is a part of my online course
where you can find also all the calculations in Excel
Management Consulting Techniques,

Tools and Frameworks
$190
$10
Click here to check my course
8
Basic tools used by
Management Consultants
9
Basic tools – introduction
10
In this section we will discuss the basic tools, techniques and
framework used by Management Consultants
Bottom-up approach Top-down approach Backward logic
Compounded effect Issue Tree Priorities
Benchmarks 80/20 rule Opportunity Tree
KPIs and business Theory of constraints

drivers and bottlenecks
11
Bottom-up approach
12
…the one you will for sure use is bottom-up approach where
you go from single (typical) consumer to market research
 First you should  Then you should try to  By estimating the number of
imagine the guess his consumption typical users you and their
typical users level consumption level you get
the rough size of the market
13
…sometimes it makes sense to divide markets in segments and estimate
them separately (i.e. average and typical users, women and man, people
in different age groups or segmentation by lifestyle)
Segment A
Segment B
14
…lets do a simple example. Imagine that you want to make an
application for franchised restaurants
 You pick the sample  You count the number  For the chosen area
group / area you want of all restaurants in the you count the
to estimate i.e. city area franchising restaurants
(here Warsaw)
 Assuming similar density as in

Warsaw you scale up the number of  You check the population of
franchised restaurants the whole country – here
15
Poland
…to make you better at this method imagine you want to sell
home made dog food….. First you have to estimate how many
dogs they are…..
+
 First you should pick  Next step is to calculate  Once you have the number also
your sample – can be how many dogs they calculate how many households they
your friends or have are in the sample
neighbors
 And assuming similar proportion as  It is now enough to know how

in your sample you scale up the many households there are in the
number of dogs country 16
…with the number of dogs you just have to estimate the
number of food eaten per year by average dog…..and you get
to the size of the food market
+
 This requires us to estimate additionally how much
 We have the number of dogs in the food would average dog eat per year
whole country. Now we have to get
from here to the dog food
 In this way using annual average consumption per dog and the
estimated number of dogs we are able to estimate how much food is
eaten every year in the country 17
Lets sum up the bottom-up approach
Bottom-up approach enables you to estimate within

one minutes the indicative size of the market
It is very good for the B2C markets
For better estimation you should segment customers
and increase the sample size
18
Top-down approach
19
When to use top-down approach?
You know the size of the whole market

You are interested in a specific segment of the
market
Segment is big enough
You are thinking about niche strategy or low cost
strategy (market re-segmenting)
20
For a change lets see how it would work with top-down
approach
 You use the total market size  You have to use some  By applying the result from
to get to the size of the sort of sample the sample you can get to
segment in which you are measure the size of the segment in
interested which you are interested
21
… let’s use the top-down approach to estimate the market for
science fiction books sold in Poland….
 You use the total number of books sold in your  Then you go to the bookstore that belongs to the biggest
country chain of bookstore and check what percentage of the
shelves are take by science fiction books
 If you use this proportion to the whole market you should

get the rough estimation of the science fiction book
segment
22
Backward reasoning
23
Imagine that you were supposed to say how much you have to
spend to create a company that has revenue of $ 100 M dollar
24
You could use for that the so called backward reasoning
25
CC: Flickr; Cycle Track
Total Costs
$ 400 M
# of leads
÷ 200 K
Average revenue
Cost of 1 lead x # of customers
per customer
$2K 20 K
$5K
% Conversion
10% x
Revenues
$ 100 M
26
Compound effect
27
There are 2 types of compounding effect
Time related Operations related
 Even if the growth is small applied over long period of  A lot of small changes in many areas may produce a
time gives big end-results big end-results
# of customers Average revenue per

customer
Start x (1+10%)^10 = 2,6 x Start +20%
+15%
Revenues
+38%
28
Issue tree
29
Issue tree - general
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Possible Reason 1 Analysis 1

Problem 1
Area 1

Problem 2
30
Issue tree in Logistics –
examples
31
Issue tree - general
Analysis to be

Problem 1
Area 1

Problem 2
32
Issue tree – example – chicken meat producer
Analysis to be
Analysis of designed routes, their
Badly designed routes length and the influence of possible
changes
High costs of transport per ton of Analysis of fuel usage and kilometers
Too big fuel usage
goods covered by vehicles
Analysis of load carried on the way

No shipments on the way back
back
Badly designed method of packaging Analysis of correlation between type

which makes the product prone to of packaging and percentage of
Big level of waste and breakage in damage damaged
Transport
transport
Analysis of time spent on the way and
Speed not adjusted to the product
kilometers covered in that time
Badly organized work and schedule of Analysis of level of overtime, daily

deliveries organization of drivers work
Low usage of resources
Limitation on delivery time of finished Analysis of Clients’ preferences on
goods delivery time
33
Issue tree in Retail –
examples
34
When you are talking about retail you should have a look a
the following areas
Retail chain development Expansion model
Product Range / Category Range

In-store process
Management
Pricing HR especially trainings
Logistic / Supply Chain
35
Below you can see example of issue tree in Retail Chain
Development
Analysis to be
Low LFL due to cannibalization (on- Analyze the change in sales after opening
line, new stores in old locations) new stores / on-line introduction
Low growth in sales

Analysis of number of openings vs
Few new openings in locations
availability of new places
Increasing rents due not proper usage Analysis of rents vs comparable

of purchasing power competition
Retail chain Decreasing EBITDA of new stores
development Salaries growth vs rotation – comparison
Growing salaries to keep low rotation
with competition
No support from the shopping malls Analysis of contracts with shopping malls
High cost of building new stores

Not optimized formats, expensive Analysis of cost per 1 sq. m, number of
fixtures fixtures, cost per fixtures
36
Issue tree – example – chicken meat producer
Analysis to be
Too many supplier of Category A that Analyze of number of suppliers and their
undermines your purchasing power share in sales vs market
Low margin on Category A

Analysis of Private Labels potential –
Lack of Private Labels
benchmarks and potential supplier
Usage of middlemen instead of direct Analysis of whom we buy from Category B

suppliers and the whole value chain
Product Range Low margin on Category B
Management
Improper planning and allocation by
Analysis of planning and allocation process
stores
Improper planning and allocation by

Analysis of planning and allocation process
stores
High inventory cost
Analysis of lead times, deliverability on-
Non-responsive supply chain
time, level of breakage
37
Low hanging fruits
38
39
Get the low hanging fruits first. By
low hanging fruits we mean things
with big impact and easy to
accomplish
40
How to find low hanging fruits?
Impact
High
2 1
 Things with big impact yet  Things with big impact that
expensive, time consuming require little work
No 3
 Easy but with low impact
Low Resources needed
Big Small 41
Low hanging fruits for a blog could look like this
Impact
High 2  Blog posts 1

 Udemy Course
 Office hours
 Additional resources
 Events
4 3
 Slideshare presentation
 Sniply
 Youtube
Low Resources needed
 Twitter
Big Small 42
Priorities
43
Priorities
 FCFS – First Come First Served (FIFO)

 LCFS – Last Come First Served (LIFO)
 Due Date
 SOT – Shortest Operating Time
44
What you do depending on the rules you use?
Time
needed for
When completion FCFS LCFS Deadline SOT
Task it came Deadline
In minutes
 Write 1 blog post  01.04  10.04  120 1 5 4 5

 Analyze sales  01.04  04.04  30 2 4 1 4
results
 Send email  02.04  09.04  2 3 3 3 1
 Read 4 articles  02.04  11.04  25 4 2 5 3
 Pay for cable TV  03.04  04.04  4 5 1 2 2
45
Benchmarks
46
47
Why you need benchmarks?
48
There are 2 types of benchmarks
Internal External
 Based on previous execution  Based on some external source (i.e. reports)

 Extremely comparable  Not that easily comparable
 Very reliable  They to be treated with caution
 Detailed – can be put for each and every activity  Only for chosen amount of activities
 Can give you food for drastic improvements - by
analyzing them you can find totally different
method of working
49
By comparing your results and benchmarks you can decide
what to improve, work on
Current Internal External
Area Unit result Conclusions
 Salary  K USD  5 4 7  Your salary went up in

comparison with your previous
one but you are still below the
market
 Speed of typing  words/ minute  40 39 80  Your typing speed has improved
slightly yet you are far below the
speed achieved by others
 Speed of  minute  15 10 12  You not only improved your speed

analyzing Excel of analyzing but also are better
than others
 Makes sense to teach others how
to do it
50
Applying 80/20 rule
in practice
51
80/20
52
What does 80/20 mean in practice
 Concentrate only on the big items

 Concentrate on the big customers
 Analyze the most typical cases
 Concentrate on the most frequently occurring problems
 Analyze problems with big impact
 Your analyses should have only 20% of the variable that
generate 80% of the impact
 Start with subjects where you see the biggest difference
between actual results and benchmarks
53
Here are 3 examples of using 80/20 rules
Area Description
 Learning Visual  Learn only the 5 most used items that will take only 20% of full course and will
Basic for Excel be used by in you in 80% cases
 Checking  You check only 20% of competitors that sales add-up to 80% of the market
competitors
 Salsa course  Go through 20% of the course to learn the moves and the figures used in 80% of
cases
54
Opportunity tree
55
Opportunity tree Opportunities
 YouTube
Traffic  Ads on instagram
 Affiliation with bloggers
# of transactions  Guest blogging
Gross Margin
 Long form / Short form
% conversion  Reduction of delivery methods
 No account
Sales  Emailing for people abandoning cart
ATV  Upselling and Cross selling

 Free delivery for higher tickets
% Gross Margin  Introduction of new categories
% Front Margin  Reducing number of suppliers

 Finding new suppliers
 Renegotiation
% Back Margin
56
Cost drivers
57
Cost drivers are causing the cost to go or down
# of slides
# of hours per 1 slide

Slide preparation
Cost of 1 hour
Cost of a Udemy course

# of lectures
Recording and editing # of minutes per 1 lecture
Cost of 1 hour
58
KPIs and business drivers
59
To understand and analyze business you have to identify the drivers / KPIs
that a key for specific business and translate it into a model in Excel
Cost of traffic
x
Rent
Ratio of visitors +
to searches
Total searches % conversion
People
Average cost of 1
x visit
Development
# transactions
x Total revenue Total Costs

Average
revenue per
transaction
-
% Fee of the Average

Total margin
marketplace transaction value
60
Imagine that you have to estimate typical family spending's. You can take
into account countless number of factors…..
61
…or you can limit yourself to the most important ones i.e. number of kids,
size of house, main repetitive spending like food.
62
To measure the selected factors you have to use some sort of KPIs
Spending per 1
person per month
per category
# of people in
average family
Average size of the

house in sq. m
Average rent per

sq. m
63
In the next lectures I will show you how to define and use
KPIs and business drivers
How to improve the results of

the Cinema
64
KPIs for cinema –
Introduction
65
In this section as a practice you will have to define the KPIs of
the cinema business and use it to see how we can improve
the profits of this business
66
We will start with the problem. You will define the KPIs and then use it to
create the analysis in Excel as well as the slide with results
Cost of traffic
x
Rent
Ratio of visitors +
to searches
Total searches % conversion
People
Average cost of 1
x visit
Development
# transactions
x Total revenue Total Costs

Average
revenue per
transaction
-
% Fee of the Average

Total margin
marketplace transaction value
67
To get the most out of the examples please try to solve the
problem on your own before going to the solution
Go to next lecture
Pause the course and
Problem set / Case where you will find the
solve the problem on
study step by step solution to
your own
the problem set
68
KPIs for cinema
69
Imagine that you were responsible for managing the cinema. What KPIs
metrics you would look at to see whether you are doing a good job?
70
Let’s see what KPIs you should look at
# of People
Rent
Total capacity in
% Utilization
tickets Average wages x
People +
x
# sold tickets
Total revenue Total Costs

x
Average revenue
per Ticket
-
+
Average price per Average additional

Total margin
ticket purchase per ticket
71
Rules for Excel
72
What rules should be used when building analysis in Excel
Usage of colors Shortcuts
Consistency between sheets No mouse
Pyramid principle Description
1-source rule Data source
Repetition of variables Master sheet
73
The most useful functions
Basic functions Financial / Mathematical Others

 SUMIF / SUMIFS  RAND / RANDBETWEEN  Pivot
 COUNTIF / COUNTIFS  MOD  Slicer
 HLOOKUP  NPV  Relative addresses
 VLOOKUP  IRR  Formats
 MATCH  ABS  Hyperlink
 SUMPRODUCT  MAX / MIN  Remove Duplicates
 IF  CORREL  Filters
 AND / OR  Sorting
 IFERROR  Data Validation
 AVERAGEIF  Trace Dependents / Precedent
 LEFT / RIGH / MID  Analysis Tool Pack
 FIND
 CONCATENATE
 YEAR / MONTH / DAY
 ROUND / ROUNDUP /
ROUNDDOWN
 TODAY
 VALUE
 WEEKDAY
74
Check also my other presentations
Essential Excel for Business

Analysts and Consultants
A practical guide
presentation
75
Power Point presentations
76
What rules should be used for Power Point Presentations
Use the template Sources
1 slide = 1 message Dates
Agenda Backup
Executive summary Next version rule
Excel analysis for every

Show money
slide
77
The kids market will be slowly growing as a result of low GDP growth
Toys
Hardware
Fashion
Market size
In milions of EUR
Total 7 380 7 734 7 717 7 785 7 859 7 963 8 058 8 198 8 334 8 459 8 570 8 692 8 811 8 914 9 012 9 119 9 209
1 641 1 658
1 605 1 622
1 565 1 586
1 523 1 543
1 476 1 500
1 433 1 450
1 392 1 389 1 401 1 415
1 328
3 334 3 374 3 407

3 216 3 260 3 298
3 084 3 130 3 171
2 946 2 981 3 033
2 862 2 855 2 880 2 908
2 804
3 806 3 857 3 911 3 965 4 011 4 055 4 104 4 144

3 480 3 473 3 503 3 537 3 583 3 626 3 689 3 750
3 247
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Euromonitor 78
Market size Toys
Hardware
In millions of EUR Fashion
Total
7 380 7 734 7 717 7 785 7 859 7 963 8 058 8 198 8 334 8 459 8 570 8 692 8 811 8 914 9 012 9 119 9 209
1 641 1 658
1 605 1 622
1 565 1 586
1 523 1 543
1 476 1 500
1 328
1 392 1 389 1 401 1 415 1 433 1 450
 The kids
3 374 3 407
market will
3 260 3 298 3 334
2 862 2 855 2 880 2 908 2 946 2 981 3 033 3 084 3 130 3 171 3 216
develop
2 804
slowly as a
result of low
GDP growth
3 806 3 857 3 911 3 965 4 011 4 055 4 104 4 144
3 480 3 473 3 503 3 537 3 583 3 626 3 689 3 750
3 247
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
The kids market will develop slowly growing as a result of GDP growth
Market size
Toys
In millions of EUR Hardware
Fashion
Total
7 380 7 734 7 717 7 785 7 859 7 963 8 058 8 198 8 334 8 459 8 570 8 692 8 811 8 914 9 012 9 119 9 209
1 641 1 658
1 605 1 622
1 565 1 586
1 523 1 543
1 476 1 500
1 328
1 392 1 389 1 401 1 415 1 433 1 450
 Toys make
3 374 3 407
30% of the
3 260 3 298 3 334
2 862 2 855 2 880 2 908 2 946 2 981 3 033 3 084 3 130 3 171 3 216
kids market
2 804
3 806 3 857 3 911 3 965 4 011 4 055 4 104 4 144

3 480 3 473 3 503 3 537 3 583 3 626 3 689 3 750
3 247
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Presentations
Practical guide how to prepare a great presentation
presentation
81

$190
$10
82
Intermediate tools used by
83
Intermediate tools –
introduction
84
In this section we will discuss the intermediate tools, techniques and
frameworks used by Management Consultants
Representative
Rankings Scenario Analysis
element analysis
Decision Tree Theory of constraints

Critical Chain
Analysis and bottlenecks
Lean Manfuacturing
85
Rankings – introduction
86
Quite often you have options that you want to somehow compare and
rank them
Option 1
Option 3
Option 4
Option 5
87
Thanks to the ranking you not only give points but you can sort them
from the most wanted to the least desired
Option 5
Option 3
Option 1
Option 4
88
You may use ranking for many things
Pick the best option from

Rank business ideas
available options
Create priorities for further

Motivate
actions
Rank people / team members Create benchmarks
89
Rankings are done in 5 steps
Create criteria and Calculate the points

Pick the preferred
weights for the Define options Gather data and create the
option
ranking ranking
 At least 3-4 criteria,  You have to define  For defined options  Define the rule /  Using the ranking
preferably all options that you gather data on the function that and additional
independent will be choosing criteria so you are assigns points for criteria you can
 Every criteria from able to calculate every criteria pick the preferred
should have a the points for every  Calculate the score option
weight – not all criteria and option for every option-
criteria have to criteria
have the same  Using weights
importance calculate the total
score
 Use the total score
to rank the options
 You can use
additional criteria
90
In the next lectures I will show you how to create and use the
rankings in practice. I will be talking about 2 examples
Expansion strategy for foreign

DIY (Home Improvements)
markets
91
How to expand the
brand – Introduction?
92
Let’s have a look at milk producer that wants to expand its product
range
Leader in milk
2nd place in butter
25 products considered
93
There are things you should consider when selecting the right
products to be developed within the same brand
Is the product consistent with the Are there customers who already
current brand? think that you have the product?
Does it require the same What is the growth rate of the

distribution? market for the product?
Do you have strong players on

the market you enter?
What is the potential of the

market?
94
How to expand the
brand – Solution
95
After we have gone through research we got the following results.
This suggest that we should start with yoghurt and yellow cheese
Market size
In mln USD
350
Yoghurt
300
250
Milk Desserts
(i.e. Monte)
200
Yellow (swiss)
cheese
150 Ice cream
Cottage cheese
100
50 Feta Cheddar
0
0 0,5 1 1,5 2 2,5 3
Attractiveness
(1-Low;3-High) 96
For more details on the case study go to my online course. You will
find there all details and Excels with calculations

$190
$10
97
Expansion strategy into other
countries - Example
98
Let’s imagine that you were to create an expansion plan for
expansion into new countries for a fashion brand
99
As you remember we have create a ranking of countries
Define criteria and

Gather data on the Create the ranking Define limits that
weights for the Set priorities
markets of markets to enter you have
criteria
 4-6 criteria on the  Ranking on the  Money for

basis of which you basis of criteria and expansion
will value specific weights created  People for
markets expansion
 Logistics
 Lead time due to
your supply chain
 Limitation in stock
100
For this we will use 4 criteria and we will estimate the size of
the markets in standard stores
 GDP per capita PPP

Criteria for  Similarity in product range
measuring the  Competition level
attractiveness of  Franchising infrastructure and the
the market
 Potential was measured using the size of the markets in terms of

Potential of the potential number of standard stores
market
101
Potential markets for expansion – Ranking vs Potential – region
Ranking of market attractiveness Potential of countries / regions to capture
(1-low; 6-High) assuming achieving share like in Poland
In standard stores
Poland 4,3 Poland 100
Eastern Europe 3,9 Eastern Europe 215
Thailand 3,6 Thailand 209

Malaysia 3,5 Malaysia 134
Middle East 3,4 Middle East 208
India 3,4 India 6 288
Western Europe 3,3 Western Europe 1 136
ex USRR 3,3 ex USRR 534
Africa 3,0 Africa 4 944
China 2,9 China 4 287
Indonesia 2,7 Indonesia 1 255
South America 2,7 South America 1 870
Turkey 2,6 Turkey 324
Australia 2,5 Australia 76
North America 2,3 North America 2 215
Philipines 2,2 Philipines 579
102
Potential markets for franchise – Ranking vs Potential – region
Potential
In number of standard stores
2 500
North America
2 000
South America
1 500
Indonesia
Western Europe
1 000
Philippines Russia + Asian

500 ex USRR
Turkey
Middle East Thailand Attractiveness
Eastern Europe (1-Low;6-High)
Australia Malaysia Poland
0
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0
103
Scenario Analysis –
Introduction
104
Future is pretty difficult to figure out. You don’t know what will happen.
In those cases it is a good idea to consider a few different scenarios 105
Future is pretty difficult to figure out. You don’t know what will happen.
In this cases it is a good idea to consider a few different scenarios 106
Imagine that you are ice cream producer and you have to decide how much
ice-cream to produce for the next day without knowing what will be the
weather. Therefore, you have to consider different scenarios
Scenario 1 Scenario 2 Scenario 3
100 70 30
107
The scenario analysis consists of 5 steps
Define the thing Check the goal

Define which drivers Define your
(goal function) you Define the scenarios function for every
are the least certain behavior / policy
want to analyze policy
 You should be  Concentrate on  It is good to define  Scenarios do not  The aim of this step
analyzing the things drivers that have 3-5 different depend on you but is to pick the right
that are threatened big impact and big scenarios your behavior does. policy, given the
by different volatility  In every scenario  You can define a scenarios and their
scenarios and are the main drivers policy / behavior policy
important for your will have different that helps you in a  The best policy is
business value specific situation the one that gives
 It can be profit,  You should assign you highest
NPV from new certain probability benefits (highest
investment, to every scenario goal function)
inventory you
should have etc.
108
In the next lectures I will show you how to create and use
scenario analysis in practice using an example from airplane
industry
Which price formula is the best

for my profits
109
for my profits – Introduction
110
Now we will try to see which price formula is better for aircraft
maintenance service company
2 sites – in Poland and

Croatia
Consider 4 different
formulas
scenarios
111
Scenario 1 Scenario 2 Scenario 3
 $ 30 K  $ 20 K  $ 15 K
Materials
 3 000 man-hours  3 400 man-hours  3 800 man-hours

Number of
manhours needed
 30%  25%  45%

Probability of the
scenario
112
Times & Materials Fixed Fee Mixed Option 1 Mixed Option 2
 Cost of Materials  $ 25 K  $ 25 K  $ 25 K
Materials increased by 15%
markup
 $ 50 per 1 man-  $ 140 K  Fixed: $ 140 K  Fixed: $ 140 K

hour  On top of that 15%  On top of that for
Labor  We look at the real of the labor cost all man-hours
man-hours needed calculated using above 2 800 we
Times & Materials use the Time &
formula Materials formula
but using the price
of $ 90 per 1 man-
hour
113
for my profits – Solution
114
2 sites – in Poland and

Croatia
formulas
scenarios
115
It seems that the Mixed Option 2 price formula is the best
solution
Gross Margin
In thousands of USD
117
90 84
58
Times & Materials Fixed Fee Mixed Option 1 Mixed Option 2
116

$190
$10
117
Representative element
analysis – Introduction
118
In many cases there are a lot of options that you can consider. For simplicity you
want to limit the options and get down to 1-5 representative elements 119
There are usually 2 main ways to use representative element analysis
Average 3 options
120
Thanks to representative element analysis you can achieve a
lot of interesting things
Compare different solutions and

Create benchmarks
decide which is better
Compare different offers and

Plan & Forecast
decide which is better
Find optimal solution Do the segmentation
121
In the next lectures I will show you how use the
representative element analysis in practice
Analysis of tariffs in a
convenience store
122
Convenience stores - Analysis
of tariffs - Introduction
123
Now we will analyze tariffs used by a Retailer operating chain of
convenience stores
Analysis to be
Discrepancies in tariffs
High costs of delivery to points of Comparison of costs of delivery and its

Transport
sales components for different regions
Lack of unified tariff / method of
calculating tariffs
Data needed:
 Tariffs charged for each and every region
 Number of points of sales
 Average length of a route, average number of points of sales per route, average number of newspapers
delivered to a point of sales
124
Now we will analyze tariffs used by a Retailer operating chain of
convenience stores
Introduction:
 You were employed by a company which distributes newspapers and FMCG goods to around 36 thousands
of small convenience stores.
 Company consists of 18 virtually independent entities linked to regions.
 Each and every entity uses different way of setting tariffs for delivering goods
Tasks:
 Figure out a way to compare costs and try to estimate in which region costs are the lowest
 Estimate current costs of distributing to points of sales
 Estimate savings provided that you manage to lower costs to the level equal to the average of 3 lowest
tariffs
125
He is using different formulas in different regions
Fixed fee per

Fixed fee per day for Fee per
Point of allocating Fixed fee per allocated
delivery newspapers route Fee per km newspapers
 Region 1 
 Region 2   
 Region 3  
 Region 4    
 Region 5    
 Region 6  
126
In order to be able to compare the results we will have create 2 typical
routes
Parameters of a typical city route: Parameters of a typical rural route:
 Average length (km) 31  Average length (km) 124

 Number of Points od delivery 21  Number of Points od delivery 29
on a typical route on a typical route
 Newspapers allocated in pieces 9 000  Newspapers allocated in pieces 3 000
127
Convenience stores - Analysis
of tariffs - Solution
128
After we have done the calculations we got the target to which more
expensive regions should strive weighted average for 3 leas
expensive regions
City route
Average daily cost per Point of Delivery in EUR
6,0
5,5 5,3 5,4 5,2 5,4
5.4
Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
Rural route
Average daily cost per Point of Delivery in EUR
9,5
7,6 7,5
6,6 6,4 6,3 7.6
Region 1 Region 2 Region 3 Region 4 Region 5 Region 6

129
If we renegotiate the contracts we can get significant savings both for
city and rural routes
City routes Rural routes
Current weighted average cost per Point of 5.39 7.57

Delivery
In EUR per 1 visit in Point of delivery
Targeted weighted average cost per Point 5.26 6.47

of Delivery
In EUR per 1 visit in Point of delivery
Number of Point of 24 828 10 829

deliveries
Estimated annual savings

1 064 3 729
In thousands of EUR
130

$190
$10
131
Decision Tree Analysis
132
Quite often you have to make important decision faced with uncertainty. In those
situation it is very useful to apply the so called decision tree 133
Let’s have a look at example. You are to build a chocolate factory. You
have to decide on the size of it. Outcome
In M USD
60%
Big Demand  50
(EBITDA= $100 M)
Big Factory
(Invest $50 M)
40%
Small Demand  -30
(EBITDA= $20 M)
What factory you
should build?
60% Big Demand  20
(EBITDA= $50 M)
Small Factory
(Invest $30 M)
40% Small Demand

 0
(EBITDA= $30 M)
134
Once you have the outcomes for each and every option it is time to
calculate the expected value for both decisions
Probability of Probability of
Expected Value = Outcome 1 x + Outcome 2 x
Outcome 1 Outcome 2
Expected Value for

= 50 x 60% + - 30 x 40% = 18
Big Factor
Expected Value for

= 20 x 60% + 0 x 40% = 12
Big Factor
135
Once you have the outcomes for each and every option it is time to
calculate the expected value for both decisions Outcome
In M USD
60%
Big Demand  50
(EBITDA= $100 M)
Big Factory
18
(Invest $50 M)
40%
Small Demand  -30
(EBITDA= $20 M)
What factory you
should build?
60% Big Demand  20
(EBITDA= $50 M)
Small Factory
(Invest $30 M) 12
40% Small Demand

 0
(EBITDA= $30 M)
136
Lean manufacturing
137
Lean Manufacturing is a philosophy of working with little waste and highest
quality. It consists of many techniques that should be gradually mastered
5S* Kanban Kaizen Poka Yoke Nested

Production
Just in time SMED TPM** OEE*** Zero defects
Process Continuous flow Standardizing

management Heijitsu box
mapping work
* Sort,Set,Shine,Standardise,Sustain
** Total Productive Maintenance
*** Overall Equipment Efficiency 138
Essential Lean Manufacturing

for Management Consultants
Practical guide how to cut costs
presentation
139
OLE
140
Overall Labour Efficiency how much work there is in the work
?
Liczba
Dodatkowe
dostępnych lalka Stawka Godzinna
przychody
godzin
Workday
Time that you can devote
100% 100 %
No work due to
Lack of work Time left for real work
organizational
issues x
54% 54 %
Movement Work
x
70% 70 %
Work well done
98% 98%
OLE = 37%141
Removing bottlenecks
142
Bottlenecks are dangerous as their hurt the efficiency of the
whole system
143
What is the throughput of every system and where
is the bottleneck? x Stage capacity
Example 1
7 5 7
Example 2
5 10 20
Example 3
5 5 3
144
The are 4 rules that you should follow when it comes to
bottlenecks
 Identify what is the bottleneck
 Increase its throughput by lowering the time needed for
everything that goes through the bottleneck
 Add new resources to bottleneck
 Adjust everything to the bottleneck – so it works at the
same pace
145
Imagine that you are working in a company working in a
content marketing xx
# of post that can
be done in a week
by 1 person
Edit and modify

Research topics for a
Write a post Create illustration post, add illustration
post
and schedule
20 5 7 10
 Speed up the writing process (faster typing, 20 8 7 10

better tools, shortcuts for the most popular
words)
 Make the researcher do also par time
writing and making illustration 10 9 10 10
 We have almost doubled the production of post with the same resources
 The same principles would apply if all the activities were done only by you – in this case it would mean that you
should not do too much research and illustration but rather improve the typing speed and match the number of
illustration and researches to your capacity in writing
 If you have no impact on the process (you are one of the guys above just doing his own part and your boss does not
want to listen to you then simply do less – identify the bottleneck and adjust your speed to his speed.
 On the other hand if you are the bottleneck then speed up because the whole team depends on you.
146
Critical Chain
147
One of the biggest problem for efficiency is the so called Parkinson’s Law –
Work expand so as to fill the time available for its completion
148
People when asked to evaluate the time certain things will take build in
buffers
Declared time
Buffer time
A B C Real execution
A+B+C
A+B+C
A B C Central buffer
149

$190
$10
150
Advanced tools used by
151
Advanced tools –
introduction
152
In this section we will discuss the basic tools techniques and
framework used by Management Consultants
Simulations Feasibility Analysis Sensitivity analysis
Decomposition
Analysis
153
Simulation analysis –
Introduction
154
Future is pretty difficult to figure out. You can use scenario analysis or
you check ALL the potential options and see which is optimal 155
Imagine for a second that you have a small bakery trying to decide what is the optimal
number of cakes that you should bake. You want to use simulations to find out 156
For the producer of cakes that at the same time can bake from 1 to 10
cakes using the simulation to find optimal production batch would
entail calculating the costs for all options
157
There are plenty of things you can do thanks to simulations
Find optimal solutions Test the boundaries of the system
Carry out sensitivity analysis Find weak spots
Plan & Forecast …..
158
In the next lectures I will show you how to use simulation in
practice. I will be talking about 2 examples
What will be the effect of the Simulation of the whole

price increase Logistics System
159
What will be the effect of the
price increase – Introduction
160
The impact of the price change on your profit will depend on
a few factors
How big the increase is Price sensitivity
What your competition The role of the product you

does? are increasing the price
How aware of prices are the Components of the average

customers? basket
161
Imagine that you want to estimate the price change impact for a small
chain of local coffee shops
20 location in Poland
Sell coffee, cakes,

sandwiches and quiches
3 different motives for

going there
162
What will be the effect of the
price increase – Solution
163
Sell coffee, cakes,

3 different motives for

going there
164
If we look just at coffee gross margin we should increase the price of
coffee by 9%. If we take into account total gross margin 4% would be a
better choice
Gross Margin – Only for Coffee vs price increase
In thousands of USD
10 000
8 000
6 000
4 000
2 000
0
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30%
Gross Margin – Coffee and Cakes vs price increase

In thousands of USD
20 000
15 000
10 000
5 000
0
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30%
165

$190
$10
166
Juice Producer – Simulation of the
whole Logistics System – Introduction
167
Let’s imagine that you have to optimize the distribution system of a
juice producer located in Serbia
Introduction:
 You were employed by a producer of local brand of Cola to carry out an operational audit.
 The producer located in Serbia where it has a significant market share. Currently, apart from warehouse next to the production facility
in Subotica, it has two additional distribution centers in Novi Sad and Belgrade.
 Currently, the goods are collected from the distribution centers by shops
Tasks:
 Calculate the cost of the current system assuming that you have warehouses in all locations
 Assume that you use 24-tonnes trucks for transportation
168
Let’s imagine that you have to optimize the distribution system of a
juice producer located in Serbia
Subotica
Novi Sad
Belgrade
Kragujevac
Prijepolje
Niš
169
Juice Producer – Simulation of the
whole Logistics System – Solution
170
At the end thanks to the simulation we get the optimal distribution
system
Total cost of end products distribution system

In thousands of USD
3 015
2 788
2 657
2 431
1 838
1 611
1 480
1 254
Warehouse only in Warehouse only in Warehouse in Warehouse only in Warehouse in Warehouse in Novi Warehouse in all No warehouses
Subotica Novi Sad Subotica and Novi Belgrade Subotica and Sad and Belgrade locations
Sad Belgrade
171

$190
$10
172
Decomposition analysis –
Introduction
173
Decomposition analysis shows you what are the components, driving
forces behind certain phenomena. Imagine for a second that we are
analyzing revenue growth of a FMCG company
Revenue Growth
174
We would like to break it down to following components. This
decomposition helps us see how we managed to grow the
revenues
Others
New products Increased price

New customers
Increased sales in existing customers and products
175
Decomposition analysis helps you achieve a lot of goals
Create a business model based

Pick the biggest contributor
on drivers and KPIs
You will know what to focus on Forecast / Plan the future

to get the required effect results
Check to what extent you were Evaluate the business / business

dealing with one-offs unit
176
In the next lectures I will show you how to create and use the
decomposition in practice
LFL analysis for a coffee shops

chain
177
LFL analysis – Introduction
178
LFL analysis is the analysis of the change in revenues for stores that have
been at least for 12 months. In this analysis through decomposition we try
to pinpoint the most important aspects
Driving KPI
Indicators dependent on others

Revenue
Average
Total # of
transaction
transactions
value (ATV)
x x
Items per Average selling

Traffic % Conversion
transaction (IPT) price (ASP)
Average first
% of first price
price
179
Imagine that you identify the driving factors in LFL growth in the last
few years
Sell coffee, cakes,

15 stores are LFL stores
180
Since in the case of the coffee shops we do not give many discounts we will
stop at the level of Average Sales Price (ASP) and not go deeper
Driving KPI

Revenue
Average
Total # of
transaction
transactions
value (ATV)
x x

181
LFL analysis – Solution in
Power Point
182
Sell coffee, cakes,

15 stores are LFL stores
183
LFL analysis shows that the biggest impact was from IPT increase.
Second in importance was traffic
Driving KPI

Revenue
120% 5% Percentage growth between

2019 and 2015
Average
Total # of
transaction
transactions
value (ATV)
20% x 12% 50% x 13%

184
LFL analysis shows that the biggest impact was from IPT increase.
Second in importance was traffic
Total LFL sales growth by KPI for stores existing since 2015
In millions of USD
2 170
8 679
2 025
3 472 29 306
12 960
Revenue 2015 Traffic Impact Conversion Impact IPT Impact ASP Impact Revenue 2018
185

$190
$10
186
Feasibility analysis –
Introduction
187
In feasibility analysis you want to check whether something is possible or
what are the limitations that you have to consider 188
In feasibility analysis you are given the goal you have to achieve. Now
you need either to find the limitation or alternative ways to reach that
goal
Way to achieve
Limitation 1 Limitation 1
the goal 1
Way to achieve
the goal 2
Goal
Way to achieve
the goal 3
Way to achieve
the goal 4
189
There are plenty of things you can do with feasibility analysis
Identify the limitation you have to Find directions in which you can to
remove to achieve the goal develop your company
Pick the most interesting way to

Build a strategy for a business unit
achieve the set goal
Check what are the limitation behind

alternative ways to achieve the goal
190
In the next lectures I will show you how to create and use in
practice the feasibility analysis
How to increase the net profit

by 10%
191
by 10% – Introduction
192
Imagine that you supporting a beauty saloon chain in Easter Europe in
their attempt to increase net profit
50 location in Easter
Europe
They mainly do manicure
They are looking for ways

to increase profit by 10%
193
There are number of ways in which you can increase the profit by
10%
Get new customers Increase prices
Convince existing ones to come

Introduce new product
more often
Upsell and cross-sell customers

during their visit
194
by 10% – Solution
195
Imagine that you supporting a beauty saloon chain in Easter Europe in
their attempt to increase net profit
50 location in Easter
Europe
They mainly do manicure
They are looking for ways

to increase profit by 10%
196
Commodity is a basic good used in commerce that is interchangeable with
other commodities of the same type
Required change to increase net margin
Description by 10%
 We increase the price for manicure for all customers  5% increase of the price
Option 1 –
Increase price  Current price is 25 USD per visit
Option 2 –  We increase the frequency of visiting our beauty shop  Increase from 1.4 to 1.6 visit per
Increase  Currently, an average customer does 1.4 visit per customer
Frequency customer
Option 3 –  We increase customer bases size – acquire new customers  Increase customer base from 60 K
Increase  Currently, we have 60 K of customers per shop to 68 K
Customer Base
 We introduce new product  We need 36% of our customer to

Option 4 – New
product  Currently we do not sell any additional product buy the new product
197

$190
$10
198
Sensitivity analysis
– Introduction
199
Once you come up with an optimal solution you want to see how
sensitive it is to small changes in underlying assumptions. The solution
can be pretty stable….
Current Solution - Current Solution - Current Solution - Current Solution - Current Solution Current Solution Current Solution Current Solution Current Solution
7% 5% 2% 1% +1% +2% +5% +7%
200
… or the contrary very volatile
Current Solution - Current Solution - Current Solution - Current Solution - Current Solution Current Solution Current Solution Current Solution Current Solution
7% 5% 2% 1% +1% +2% +5% +7%
201
You want to carry out a sensitivity analysis for many reasons
Sensitivity analysis helps you

Volatility means risks
manage expectations
You want to prepare for the risk / Sensitivity analysis is basis for
hedge against the risk managing a portfolio of projects
In some cases you may want to

choose less sensitive option
202
Sensitivity analysis –
Solution
203
As you can see the revenue growth is very sensitive to changes in
IPT but not that much to changes in conversion rate
Revenue growth between 2019 and 2015 depending on the increase of IPT (Items per Transaction)
In millions of USD
15 656 16 278
14 412 15 034
13 167 13 789
11 923 12 545
10 679 11 301
9 435 10 057
8 191 8 813
7 569
0,03 0,04 0,05 0,06 0,07 0,08 0,09 0,10 0,11 0,12 0,13 0,14 0,15 0,16 0,17
Revenue growth between 2019 and 2015 depending on the increase of % Conversion
In millions of USD
12 234 12 390 12 545 12 701 12 856 13 012
11 301 11 457 11 612 11 768 11 923 12 079
10 835 10 990 11 146
0,30% 0,40% 0,50% 0,60% 0,70% 0,80% 0,90% 1,00% 1,10% 1,20% 1,30% 1,40% 1,50% 1,60% 1,70%
204

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$10
205
Subscribe to our channels:
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Consultants
Blog
206
Essential Excel for Business

A practical guide
presentation
207
Top 10 courses that every

Management Consultant should
take
My super objective view
presentation
208
Top 25 books that every

Management Consultant should
read
My super objective view
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209
How to manage a consulting

project?
A practical guide
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210
Business modeling of offline

businesses in Excel
A practical guide
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Supply Chain for Management

Consultants
Practical Guide
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212
Sales Analysis for Business

A practical guide
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213
Retail for Business Analysts and

A practical guide
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214
Management consultant
productivity hacks
How to be lazy and still get things done
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215
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Practical guide for startups and entrepreneurs
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216
5 examples of business /
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Practical guide how to check whether the business makes
sense
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217
Essential Lean Manufacturing

for Management Consultants
Practical guide how to cut costs
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218
What is an issue tree and how

to use it?
Practical guide with examples
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219
Excel shortcuts for Management

Consultants and Business
Analysts
Practical guide how to work fast in Excel
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Financial Modeling for Business

Analysts and Management
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Step by step guide
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222
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Practical guide how to pass the case part
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A practical guide
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227
How to create management

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228
Management consultant
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How to be lazy and still get things done
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Management Consulting

Tools, Techniques and

Luckily, there are a lot of nice management consulting tools, techniques

Management Consulting Techniques,

Click here to check my course

Bottom-up approach Top-down approach Backward logic

Compounded effect Issue Tree Priorities

Benchmarks 80/20 rule Opportunity Tree

KPIs and business Theory of constraints

 Assuming similar density as in

 And assuming similar proportion as  It is now enough to know how

Bottom-up approach enables you to estimate within

You know the size of the whole market

 If you use this proportion to the whole market you should

Time related Operations related

# of customers Average revenue per

Possible Reason 1 Analysis 1

Possible Reason 3 Analysis 3

Possible Reason 1 Analysis 1

Possible Reason 3 Analysis 3

Analysis of load carried on the way

Badly designed method of packaging Analysis of correlation between type

Badly organized work and schedule of Analysis of level of overtime, daily

Retail chain development Expansion model

Product Range / Category Range

Pricing HR especially trainings

Logistic / Supply Chain

Low growth in sales

Increasing rents due not proper usage Analysis of rents vs comparable

High cost of building new stores

Low margin on Category A

Usage of middlemen instead of direct Analysis of whom we buy from Category B

Improper planning and allocation by

 Easy but with low impact

Low Resources needed

High 2  Blog posts 1

 FCFS – First Come First Served (FIFO)

 Write 1 blog post  01.04  10.04  120 1 5 4 5

 Read 4 articles  02.04  11.04  25 4 2 5 3

 Pay for cable TV  03.04  04.04  4 5 1 2 2

 Based on previous execution  Based on some external source (i.e. reports)

 Salary  K USD  5 4 7  Your salary went up in

 Speed of  minute  15 10 12  You not only improved your speed

 Concentrate only on the big items

ATV  Upselling and Cross selling

% Front Margin  Reducing number of suppliers

# of hours per 1 slide

Cost of a Udemy course

x Total revenue Total Costs

% Fee of the Average

Average size of the

Average rent per

How to improve the results of

x Total revenue Total Costs

% Fee of the Average

Total revenue Total Costs

Average price per Average additional

Usage of colors Shortcuts

Consistency between sheets No mouse

Pyramid principle Description

1-source rule Data source

Repetition of variables Master sheet

Basic functions Financial / Mathematical Others

Just in time SMED TPM OEE* Zero defects