Smartly Finding Significant Cost Reduction Opportunities

S&OP with Profit
tackle supply chain stress

Smartly Finding Significant Cost Reduction Opportunities

search for cost reduction opportunities

Finding cost-to-serve opportunities buried in the P&L

In this tough operating environment, companies are often forced to use a generalized strategy on cutting costs in key areas like minimizing supplier replenishment orders

Importantly, the specific total cost-to-serve and profit performance contributions by SKU, Customer and Channel are buried and certainly not visible through the P&L. So what is at stake? Hidden opportunities to realize significant cost reductions while increasing profit margins!

Case In Point: The following table shows the segmentation of customer performance by unprofitable customers (Unprofitable column), marginally performing customers (Bottom 4% column) and very profitable customers (Top 96% column). The same analysis can be done by products, markets, regions and channels.

184 unprofitable customers represent 34% of total Net Sales but add 41% of the total Net Landed Cost to Serve. Bottom line, company profitabiliy is reduced over 50%.  Highly profitable customers (491) represent 61% of total Net Sales but produce 196 of profitable performance. The distribution of Customer profit contributions is not atypical.

: Specific and accurate Cost-to-Serve and Net Landed Profit performance knowledge is essential in managing dynamic and changing operating environments. Using generalized information in managing your operation can lead to missed cost reduction and profit protection opportunities. Accurate, specific and repeatable Cost To Serve insights will allow you to out pace your competition and delight your stakeholders.

Please comment on this posting or email me at [email protected]

All the best,

Richard Sharpe
CEO – Competitive Insights