Direct product profitability

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The term direct product profitability (DPR) is understood to mean the gross profit minus direct product costs (DPK) at the wholesale and retail level, based on a single sales unit.

This cost accounting system was already discussed in the German consumer goods industry and in retail trade in 1985 . In particular, it is intended to support distribution-logistical decisions and to supplement the dominant decision-making parameters of sales and trading margin.

Despite initial approaches in the 1960s, the development of a uniform FREP model was not seriously undertaken until the early 1980s.

In 1985 the US Food Marketing Institute (FMI), at the time the National Association of Food Chains, tried to create a common model for users in the US .

In the same year, the Institute for Self-Service and Goods Management (later EHI Retail Institute ) was commissioned to transfer the American FMI-DPP model to German conditions. As a result of these efforts, the EHI-DPR model emerged. This model is still the most important and most widely accepted FREP model in Germany.

criticism

The model of direct product or article profitability, which is particularly recommended for trading companies - actually a commercial ideal - has not proven itself in commercial practice despite highly developed data acquisition and processing. For logical and factual reasons, it cannot (according to Schenk) be successful either. H. lead to the calculation of product profitability, let alone serve as a calculation basis; because

  • Profitability as the quotient of profit for the period and capital employed can only be determined ex post;
  • It is practically impossible to completely break down the overhead costs (e.g. corporate taxes, energy costs or the costs of image advertising) to one of the tens of thousands of items in the range or even to a single sales unit. Even an approximation to a value that would come close to an item profitability would require an immense and economically pointless data collection effort;
  • It is completely impossible to allocate costs to an article at an exact time, even at short notice. The accrued interest burden on the Monday stocks of gummy bears in a supermarket is different from the interest burden on the Wednesday stocks. The heating costs and all other types of costs cannot be calculated for the exact item or day. Other factors affecting income, e. B. bonuses granted at the end of the year or total sales discounts are U. not yet known.

The old problem of the residual costs remains, which includes all variable and fixed costs that cannot be offset as direct product costs. More precise article-related income statements than the conventional contribution margin calculation are not in sight, thus no article profits or article profitability. The replacement of the term “article profitability” by “article profitability”, which has sometimes been proposed, does not lead any further in the matter.

Individual proof

  1. ↑ See Hans-Otto Schenk: Marktwirtschaftlehre des Handels , Wiesbaden 1991, pp. 198f., ISBN 3-409-13379-8

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