TRUE COST TO SERVE ANALYSIS
To achieve competitive advantage in an ever-changing world with stiff global competition, the pressure to improve profitability is constant. It is often clear what revenue each customer or product generates. However, it is not always clear what true cost-to-serve (TCS) the organization incurs to serve each customer or to produce, sell, and distribute each product.
Analyzing a company’s TCS at the customer level provides valuable insight into key customers, customer segmentation, product and profitability. It yields information about the true cost of servicing individual customers by quantifying specific business activities and overhead consumption (cost driver) on a customer and/or product level.