Cost to serve

dreamstime_m_64542252Conflicting departmental targets often cause conflicting focuses within an organisation, by focusing on buying for the lowest purchase price, distribution on the lowest cost to serve, merchandising introducing additional SKU (range extension) and new ranges with different physical / handling attributes, finance on Working Capital Employed and stores wanting more inventory.

The targets set at a departmental level create focused behaviour to meet their personal targets / KPI, without fully appreciating (and caring) about the difficulty it may cause somewhere else. This results in hours of internal negotiation to meet internal targets, resulting often in overstocking, significant discounts and a lower net margin.

This can be avoided by creating an end-to-end target which focuses on maximising the financial performance of the product and services the company sells. A cost-to-serve focus does exactly that, by buying the appropriate product quantity for the best source to maximise margin, the appropriate logistics channel associated for the product and the inventory at the right location to maximise sales.

If you are interested in maximising the margin for your business, read more about our Cost-To-Serve approach by downloading the full PDF version here or contact us on 01527 889060 or email info@logistics.co.uk.