Michael Thompson’s Post

𝐌𝐚𝐬𝐭𝐞𝐫𝐢𝐧𝐠 𝐂𝐨𝐬𝐭 𝐭𝐨 𝐒𝐞𝐫𝐯𝐞 𝐟𝐨𝐫 𝐲𝐨𝐮𝐫 𝐑𝐭𝐌 –𝐓𝐨𝐩 𝟏𝟎 𝐓𝐢𝐩𝐬 Cost to Serve  is a financial metric used to determine the total cost of delivering a product or service to a customer. It helps businesses understand profitability at a granular level by breaking down costs across different customers, channels, and service levels.   When determining the Cost to Serve (CTS) for a Route to Market (RTM), it’s crucial to ensure accuracy, practicality, and actionable insights. Here are 10 practical tips to consider:   𝟏. 𝐃𝐞𝐟𝐢𝐧𝐞 𝐭𝐡𝐞 𝐒𝐜𝐨𝐩𝐞 𝐂𝐥𝐞𝐚𝐫𝐥𝐲 𝟐. 𝐂𝐚𝐭𝐞𝐠𝐨𝐫𝐢𝐳𝐞 𝐃𝐢𝐫𝐞𝐜𝐭 & 𝐈𝐧𝐝𝐢𝐫𝐞𝐜𝐭 𝐂𝐨𝐬𝐭𝐬 🇹🇮🇵 Assign costs based on actual usage, not broad allocations. 𝟑. 𝐒𝐞𝐠𝐦𝐞𝐧𝐭 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫𝐬 𝐚𝐧𝐝 𝐂𝐡𝐚𝐧𝐧𝐞𝐥𝐬 🇹🇮🇵 Use a Pareto approach—focus on the 20% of customers or channels that drive 80% of costs. 𝟒. 𝐌𝐚𝐩 𝐭𝐡𝐞 𝐄𝐧𝐝-𝐭𝐨-𝐄𝐧𝐝 𝐑𝐓𝐌 𝐏𝐫𝐨𝐜𝐞𝐬𝐬 🇹🇮🇵 Visualize with a cost-to-serve process flowchart to pinpoint inefficiencies. 𝟓. 𝐂𝐚𝐩𝐭𝐮𝐫𝐞 𝐓𝐫𝐮𝐞 𝐋𝐨𝐠𝐢𝐬𝐭𝐢𝐜𝐬 & 𝐃𝐢𝐬𝐭𝐫𝐢𝐛𝐮𝐭𝐢𝐨𝐧 𝐂𝐨𝐬𝐭𝐬 🇹🇮🇵 Identify if you are making too many small deliveries or servicing unprofitable geographies. 𝟔. 𝐌𝐞𝐚𝐬𝐮𝐫𝐞 𝐇𝐢𝐝𝐝𝐞𝐧 𝐂𝐨𝐬𝐭𝐬 (𝐑𝐞𝐭𝐮𝐫𝐧𝐬, 𝐃𝐢𝐬𝐜𝐨𝐮𝐧𝐭𝐬, 𝐚𝐧𝐝 𝐒𝐭𝐨𝐜𝐤 𝐇𝐨𝐥𝐝𝐢𝐧𝐠) 🇹🇮🇵 Apply ABC analysis—categorize products based on movement rates. 𝟕. 𝐅𝐚𝐜𝐭𝐨𝐫 𝐢𝐧 𝐒𝐚𝐥𝐞𝐬 & 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐄𝐟𝐟𝐨𝐫𝐭 🇹🇮🇵 Use Time-Driven Activity-Based Costing (TDABC) to measure actual time spent per customer.   𝟖. 𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭𝐢𝐚𝐭𝐞 𝐁𝐞𝐭𝐰𝐞𝐞𝐧 𝐏𝐫𝐨𝐟𝐢𝐭𝐚𝐛𝐥𝐞 𝐚𝐧𝐝 𝐔𝐧𝐩𝐫𝐨𝐟𝐢𝐭𝐚𝐛𝐥𝐞 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫𝐬/𝐎𝐫𝐝𝐞𝐫𝐬 🇹🇮🇵 Consider tiered service models—offer premium service only to high-margin customers. 𝟗. 𝐋𝐞𝐯𝐞𝐫𝐚𝐠𝐞 𝐃𝐚𝐭𝐚 & 𝐓𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲 𝐟𝐨𝐫 𝐀𝐜𝐜𝐮𝐫𝐚𝐜𝐲 🇹🇮🇵 A heatmap of CTS by region/channel can highlight inefficiencies. 𝟏𝟎. 𝐑𝐞𝐠𝐮𝐥𝐚𝐫𝐥𝐲 𝐑𝐞𝐯𝐢𝐞𝐰 𝐚𝐧𝐝 𝐀𝐝𝐣𝐮𝐬𝐭 𝐂𝐓𝐒 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 🇹🇮🇵 Set KPIs for cost efficiency—e.g., cost per order, cost per revenue %. Cost to Serve analysis is always a valuable exercise that always delivers major cost and margin benefits.   If you’d like to explore how Cost to Serve can transform your Route to Market, please do contact me. Please read my Article for more information.   I would also love to hear your thoughts!  Do you use Cost to Serve in your Route to Market and with your distributors? If so, what advice could you offer fellow professionals.     #enchange #sales #routetomarket #costtoserve #distributors