The Cost-to-Serve Walk…Taking Control in the Storm
Uncertainty is mounting with skyrocketing transportation and fulfillment costs. The key is to focus on what is controllable in the fog of today's volatile environment and take swift action to counteract rising costs. This includes the often overlooked areas under costs-to-serve that can eat away at profit without providing any real value to customers.
Synapsum helps companies identify opportunities to reduce and recover costs under the “Cost to Serve” areas (see Figure 1), bringing visibility to the drivers and influencers of costs down to the order line level. Synapsum’s Cost-to-Serve IO solution is used by Fortune 1000 distributors and manufacturers who have realized over 250 bps margin gains in 12 weeks or less. Check out our customer case studies.
The rest of this post outlines a way to start to plan new ways to reduce and recover costs. Download this Cost-to-Serve Map to help you plan with your business to reach this year’s profit targets.
Figure 1: Areas under Cost-to-Serve can offer significant opportunity to improve net margin
Step 1
Which areas under Figure 1 are most compressing profit margins? Where are variances most significant?
You know your business and what is driving costs into operations that may be buried in financial accounting and reporting. Pinpoint what is influencing costs.
Synapsum recently worked with a distributor in which a subset of customers tended to order in small frequent deliveries during its busiest peak selling season, resulting in added weekly stops in half-empty trucks. This was further compounded by lost routing efficiencies as deliveries took place out of scheduled days. Synapsum Cost-to-Serve IO quantified the cost of exceptions, highlighted the drivers that mattered vs. the ones that had a lesser effect to tailor the right prescription. Learn more about the steps and results by clicking here.
Figure 2: Demand and order-level influences driving up costs without real value-add for customers
Step 2:
Where are there demand and order-level influences driving up these costs without adding any real-value for your customers?
In another example, a leading book distributor missed its profit target as it exceeded its internal fleet capacity requiring use of expensive spot market contract transportation and warehouse labor overtime. Synapsum’s tools and methodology helped this distributor identify where demand was unprofitable. Furthermore, Synapsum helped orchestrate the activities of the commercial team to work with customers to shift unprofitable volumes to off-peak periods resulting in a 1300 BPS margin improvement and overall better customer experience. Learn more about steps this book distributor took by clicking here.
Download Syanpsum’s Cost-to-Serve Map today, a useful resource when planning your fiscal year or next season. Talk to your business partners about ways you can reduce and recover cost.
What to discuss further? Reach out stephanie@synapsum.com