Analyze and Quantify All Supply Chain Activities
and Reconfigure Network for Optimal Service Level and Cost
Unpredictable consumer behavior and heightened market competition are forcing companies to continually innovate, increasing the total number of products they have to source, make, store,
pick, deliver, service and recycle. This complexity is compounded by customer demand for price and service. In parallel, organizations pursue new business and look to grow sales, and do so with the assumption that supply chain is a fixed cost where any new customers’ volumes will beneficially drive economies of scale. Combined, these trends can negatively impact a company’s profitability, pushing organizations to re-assess their total cost-to-serve by customer, product and channel.
Cost-to-serve is the analysis and quantification of all supply chain activities and costs incurred to fulfill a customer’s product demand. This is accomplished by modeling all the supply chain activities in the network, and properly allocating fixed and variable costs. Understanding detailed cost-to-serve, by customer and product, is a pre-requisite for any organization looking to manage its profitability. Reducing organizational costs and improving delivery efficiency as well as ‘right sizing’ the service offering for a particular product, customer or channel is an imperative. Organizations can model routes to market and service strategies based on this segmentation, and understand the impact on their individual cost-to-serve.