Service

Cost to Serve Analysis

While most companies are aware of their total warehousing and distribution costs, many lack detailed insights into their supply chain expenses. Often, businesses view these costs as a simple percentage of the total or on a per-unit basis, without delving into the specifics necessary for informed decision-making.

 

Cost to serve modelling provides the detailed analysis required for making critical business decisions related to pricing, investment, minimum order sizes, and discount structures. This modelling helps answer important questions about the cost implications of various aspects of the supply chain, such as the cost associated with a particular product SKU, customer group, or market region. It also evaluates the impact of changing order quantities, lead times, and delivery methods on overall costs.

 

Our approach to cost to serve modelling involves analyzing all relevant costs within the supply chain at the storage unit and order level. These costs include inbound shipment, inventory and storage, warehouse activities (such as receipt, picking, and dispatch), delivery, order processing, and administrative expenses.

By determining costs at this granular level, businesses can gain a comprehensive understanding of the expenses associated with specific products or traffic flows. This detailed analysis enables more informed commercial and operational decisions, helping companies optimize their supply chain strategies effectively.

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