Cost-to-Serve Case Samples from The Smart Cube
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Transcript of Cost-to-Serve Case Samples from The Smart Cube
Cost-to-Serve Overview and Case Examples
July 2014
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Introduction to Cost-to-Serve
What is Cost-‐to-‐Serve? § Cost-‐to-‐Serve is an analysis that helps calculate the total cost of servicing customers at a customer, product, or channel level
§ Once Cost-‐to-‐Serve is in place, it can be overlaid with Customer Life>me Value/Revenue and create customer segments to develop segment specific strategies on service mix and opera>onal changes
Key business ques6on that Cost-‐to-‐Serve can help answer: § What is the break down of cost components? § Which cost has the highest propor>on? § Which customers, products or channels have higher propor>on of costs? § Who are the most profitable customers? Business impact of Cost-‐to-‐Serve: § Visibility on customer profitability § Customer service teams can develop differen>ated service when combined with revenue § Supply team can op>mize picking and ordering costs, and to formulate policy such as minimum order value
OVERVIEW
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SELECT CASE EXAMPLES
Study Objec6ve § The client, a UK energy and home services provider, wanted to iden>fy cost saving opportuni>es, understand various cost profiles and user segments based on overall cost to serve; TSC to create a cost to serve model
TSC Approach § TSC analyzed the individual cost center datasets (inbound, outbound, complaints, etc.) and mapped them to the major process heads (billing, metering, etc.) to create consolidated master data
§ Various parameters, such as average cost, percentage split and overall CTS, were derived at a cost center level and process level
§ Detailed analysis for each process was carried out to understand the cost profiles of cost centers under each process and subsequently a drill down analysis was performed to derive insights related to process improvements and cost savings opportuni>es
§ Using the consolidated dataset, customer segments were created through sta>s>cal techniques and were then profiled to derive ac>onable insights at the customer level
Cost-to-Serve Analysis – Utilities
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Study Objec6ve § The client, a leading pharmaceu>cal and consumer goods manufacturer, wanted to analyse cost-‐to-‐serve (warehousing cost, transporta>on cost, sales value, etc.,) for all shipments across its distribu>on network
§ The key objec>ve was to reduce distribu>on spend through cost-‐to-‐serve program by determining op>mal “Way to Market” and developing best-‐in-‐class trade terms specific to DAHB regional requirements
TSC Approach § Order lines data, freight audit data and warehousing reports were linked to each through unique keys to create a master dataset covering all cost components and sales value for each delivery line
§ The level of linkage between various datasets was assessed by means of valida>on reports, and correc>ve ac>ons were taken to enrich the data
§ Further, addi>onal details on customer category, trade terms, etc., were included in the master database
§ Post finalizing the database, various cost reduc>on policies such as minimum order value, direct vs. wholesalers, unit vs. case picking, etc., were analysed and compared to further decision making
Cost-to-Serve Analysis – Pharmaceuticals
SELECT CASE EXAMPLES
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SELECT CASE EXAMPLES
Study Objec6ve § The client, a leading pharmaceu>cal and consumer goods manufacturer, was interested in analysing its shipment transporta>on costs to es>mate the cost-‐to-‐serve customers and evaluate its impact on the company’s P&L
§ TSC was required to model the various transporta>on cost components such as product mix, shipment route/customer loca>on, ordering profile and frequency, and develop cost profile for each customer highligh>ng the scope for cost reduc>on
TSC Approach § TSC analysed the components of transporta>on cost and their impact on overall P&L, considering mul>ple variables such as shipment order frequency and size, distance travelled and overall sales value (by pallet, business units and brands), using regression analysis
§ Further, the team analysed cost opportuni>es such as shipment consolida>on and co-‐loading, to es>mate poten>al savings and highlighted large savings areas
§ Based on the above parameters, the project team also developed a ‘Customer Analysis Dashboard’ to help the client track and assess various parameters such as customer order profile, trends in transporta>on cost and shia in P&L, through user generated reports
Cost-to-Serve Analysis – Transportation
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Our solutions combine cost components from disparate data sources to provide a holistic view of the cost it takes to serve a customer
APPROACH
The Smart Cube is a global professional services firm that specialises in delivering custom research and
analytics services to corporations, financial services, and management consulting firms.
The Smart Cube has conducted more than 17,000 studies to date across virtually every major industry, function, and region through its global team of over
400 analysts.
The firm is headquartered in the United Kingdom with additional offices in the United States, China, Germany,
Hong Kong, India, Romania, Switzerland, and Uruguay. The Smart Cube is ISO 27001 certified and audited by BSI for assurance on data protection and
confidentiality.
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