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.

BENEFITS OF TRUE COST TO SERVE ANALYSIS

DRIVE REVENUE, REDUCE COST

TO OVER-SERVED CUSTOMERS & IMPROVE PROFITABILITY

  • Identify cross-sell and up-sell opportunities
  • Identify revenue growth opportunities through price increases
  • Identify customer buying patterns that can indicate issues with products, competitors or sales teams
  • Understand total cost to serve for each product group, SKU, customer segment and individual customer
  • Identify and fix unprofitable customers and products

KEY BUSINESS QUESTIONS

YOU WILL BE ABLE TO ANSWER

  • Which products and channels have the highest and lowest operating margins?
  • Which customers have the highest and lowest operating margins?
  • How do you predict product performance and possible threats through revenue trends?
  • Do you provide the right products to the right customers?
  • How are we tracking against the plan?