Now drive your Business forward using Cost to Serve Insight

You can’t run your business effectively focusing on gross margin. With today’s growing complexity in products, customers, processes, routes-to-market and supply chain comes confusion as to where your business makes true profit. Gross margin is no longer a good indicator of profitability, as other costs within the value chain can have a significant impact on true contribution.

The solution is not a resource heavy, activity based costing exercise, as this is rarely sustainable, but is more of a driver based cost-to-serve approach which leverages available systems, such as, for example, order level transactions, operations, inventory and other general ledger costs. By integrating relevant data sources and building a cost-to-serve methodology the business can maintain an accurate and detailed picture of where the business makes profit.

This detailed understanding of where a business makes its profits, within complexity, ensures that resource focus is placed where it’s most valuable and sustainable. A granular view of underperformance offers options for specific ‘surgical’ action rather than broad based amputation of an offering. Similarly, aligning the business to focus on specific high contribution opportunities – for example by SKU, channel or account – will lead to greater wins where it’s most relevant.

You can make a staggering difference to your business performance by utilising cost to serve insight, as one of PMSI’s international business to business clients recently quoted to the City in the midst of such an initiative:

“We…simplified our business by successfully implementing some 3000 SKUs – this has provided opportunities to convert customers to alternative products…. We are looking at our product line holistically. We will delete additional low-performing SKUs as appropriate, while pursuing additional up-selling and cross-selling opportunities and price increases. We are rolling out a more sophisticated account management system globally to improve customer profitability.” (March 2010).

PMSI can help you develop new and innovative ways of using business intelligence to drive the business profitably. Systemising the use of data and intelligent analysis in a complex environment is an opportunity for you to create real competitive advantage.

To understand the benefits this approach can bring to your own business, do get in touch with your nearest PMSI office or contact us via email. 

Best wishes,

Patrick Mosimann
PMSI Managing Director