Cost to Serve

What is Cost to Serve?

Cost to Serve (CTS) is an analysis that calculates the profitability of products, customers, and routes to market, and provides a fact-based focus for decision making on service mix and operational changes for each customer that a business caters to.

Customer satisfaction is the biggest driver of success for supply chain businesses. But with all the focus laid on fulfilling customer expectations, profitability should not be overlooked.

Logistics costs often make up a big part of the overall Cost to Serve for supply chains. By performing a Cost-to-Serve analysis, it is possible to understand what it truly costs to deliver an item or service to a customer, and make well-informed decisions to reduce the CTS.

Objectives of Cost-to-Serve model

• To identify high and low cost to serve customers
• To align distribution channels effectively to minimize the cost to serve.
• To reduce logistical costs of operations
• To improve supply chain efficiencies, customer experience and profitability

Benefits of Cost-to-Serve optimization

• Helps to identify low margin customers where the cost of servicing them outweighs the profit margin
• Enables businesses to identify lower margin products that have additional service costs eating up profitability
• Find out high-cost processes in logistics for low margin products or customers
• Helps to transform unprofitable customers into profitable ones
• Guides businesses for better cost allocations and pricing decisions
• Allows enterprise to address varying customer needs
• Creates avenues to streamline logistics activities and processes

How Locus helps businesses lower logistics costs?

Route optimization

Locus’ route optimization solution generates optimal routes after factoring in more than 180+ real-world constraints. It plans routes in a way that there are no overlaps between delivery routes of two different vehicles. This minimizes the number of vehicles used on the same route, thereby reducing logistics costs.

Analytics and insights

The Locus offerings provide performance reports that contain logistics analytics and insights of the on-ground workforce. Its engaging visual representation and dashboards helps businesses identify performance gaps and inefficiencies and take corrective action to rectify them. These analytical insights enable businesses to make informed decisions and improve on-ground efficiencies, thus reducing costs.