Cost to serve

From Wikipedia, the free encyclopedia

Cost to Serve is a process-driven accountancy tool used to calculate the profitability of a customer account, based on the actual business activities and overhead costs incurred in service that customer.[1] Businesses are able to reposition customers and services, and how they are served to improve overall margin.[a]

Supply chain management[]

In the context of supply chain management the tool can be used to analyse how costs are consumed throughout the supply chain. It shows that each product and customer demands different activities and has a different cost profile. The product and customer profiles are often illustrated using a Pareto analysis curve which highlights those that contribute most to the company's profit and those that erode it. Unlike Activity Based Costing (ABC), Cost to Serve is not resource-intensive and focuses on aggregate analyses around a blend of cost drivers. The tool gives an integrated view of costs at each stage of the supply chain, providing a fact-based view to unravel the complexity of multiple supply chains and channels to market. It enables a focus on both long-term decisions and the prioritisation of short-term actions.

See also[]

Notes[]

  1. ^ Cost-to-Serve is a registered trademark of LCP Consulting Ltd.

References[]

  1. ^ "IGD Glossary - Cost-to-Serve". IGD. Archived from the original on 2011-07-13. Retrieved 2009-09-09.

Further reading[]

  • Christopher, M (2005), ‘Logistics and Supply Chain Management’, 3rd edition, Financial Times/Prentice Hall
  • - LCP Consulting Ltd
  • Logistics Bureau, Cost to Serve Articles
  • Braithwaite, Samakh (1998), 'The Cost-to-Serve Method', The International Journal of Logistics Management, Volume 9 Issue 1 p69-84, ISSN 0957-4093
  • Guerreiro, Bio, Merschmann (2008), 'Cost-to-serve measurement and customer profitability analysis', The International Journal of Logistics Management, Volume 19 Issue 3 p389-407, ISSN 0957-4093
  • Australian Food & Grocery Council / Focus Information Logistics, 'A Guide to using cost to serve to enable effective customer engagement'
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