Cost-to-Serve is one of the most critical measures of a supply chain. Keeping profitable customers is the key to continued growth for any organization, regardless of size or industry. Cost-to-Serve involves linking the costs of logistics activities together in order to enable proper allocation to products, customers, and channels. In a recent Aberdeen Report (www.aberdeen.com), analysts looked at the factors allow leading supply chains to link their segmentation strategy to their Cost-to-Serve modeling. The report outlines many pressures and determining factors to improving P&L through Cost-To-Serve analysis.
1.Maturity of the Supply Chain:
Mature supply chains (as measured by a variety of factors such as technology employed, operational best practices, organizational structure, process flows, visibility that drive logistics capabilities) showed better control on Cost-To-Serve analysis and therefore, strategy. Best practice Leaders had a 0.5% decrease in total landed per unit costs year over year VS. Followers in the same category had a 8.5% increase in total landed per unit costs year over year
2. Access to Real Time Data and Integration:
Having the data to analyze in real time as well as automated processes allow more informed and faster decisions in the supply chain. Leaders were over 9X more likely to automate supply chain planning and load optimization than the Follower category and over 4X more likely to automate communication with trading partners.
3. Customer Segmentation:
Shippers are continually analyzing their customer base and creating groups of customers, not just by revenue potential. Best in class Leaders are 83% more likely to segment the demand forecasts based on key product-customer characteristics.
The leaders in these categories have the visibility to Cost-To-Serve metrics, whereas the followers often do not. Companies who had top supply chain performancee achieved double-digit freight rate reductions and optimized global costs, even while operating their supply chains among new pressures and complexities.
Read the full report at: http://www.leanlogistics.com/blog/wp-content/uploads/sites/3/2014/09/0687-9638-CUR-RR-InbndOptLinkCostEvent4ImprvdPL.pdf
