At its core, cost-to-serve is an application of Activity Based Costing. With the help of efficient management, it can significantly improve overall business profitability. Nowadays, it is possible to calculate the actual cost to serve with data integration and analytics, but it requires a process-based eco-system to be cost-effective. Let’s discuss a few points to overcome cost-overruns and unprofitable spendings and conduct prolific cost to serve analysis.
- Costs to serve a customer and product type should be reviewed periodically and compared with the current costings.
- Gaps and opportunities should get identified for additional investment. This will drive operational profitability in the business process where the costs to serve are very high.
- Periodic progress checks should be there to ensure that the new investments and projects are on track.
- Compare costs to serve with internal benchmarks and KPIs.
- Cascade costs related information within teams for better visibility and continuous improvements.
- Cost to serve analysis is an ongoing process. It will take time to show the results. The entire team should continuously drive and identify opportunities to improve.
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