- Not all customers are equal. Don't you get tired of selling to all of your customers at the same price when you know that some cost you significantly more to serve? Cost-to-Serve is a key concern for companies delivering value-added services. Acorn Systems enables companies to understand their Cost-to-Serve from broad customer segments and product categories to specific customers
or orders. This has allowed our customers to develop effective cost plus pricing or menu based pricing. With robust "what-if" capability, our customers are also able to understand cost plus estimating and bidding. Acorn's Cost-To-Serve solution
Cost-to-Serve Examples for a Service Provider and Manufacturer-
Service Provider
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Customer A requests services via your website, doesn't change his request, rarely calls your customer support line or when he does, does not call during peak times. He even sets up automated payments from his checking account. It's not surprising that he is also purchasing your most profitable products.
- Customer B attempted to request services via your website once, and that generated a 30 minute call with your customer support to walk him through the process. Since that time, he has never used the website again, and only makes requests through calls to your customer support at peak time. His payments are in the form of paper checks and are frequently late. This is a high maintenance person.
- It doesn't seem right. There must be a way to reward Customer A for helping you to
reduce service costs and, at the same time, incent Customer B to do the same.
- The good news is that there is an answer. It comes through a simple and practical use of
costing methodologies through the Acorn Systems Cost Analyzer
- For a service provider, this means you can identify which customers are more profitable and have enabled you to reduce total service costs and those who have increased service costs through high touch service models, late payments and peak capacity usage.
As a result, you can
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• Perform better customer segmentation
• Trace the cost of providing a service
• Rationalize your service offering
• Develop accurate pricing for outsourcing your services
• Determine the Cost-to-Serve at various levels of capacity utilization
• Make the best staffing and outsourcing decisions
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Many service providers have used this information to implement relationship or segment pricing that incent and reward those customers who migrate to low cost service models.
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Manufacturer
- Customer A has centralized buying, sets their pricing twice a year, always orders in full pallet and full truckloads, rarely deducts, conducts business electronically and even pays on time. They're tough but fair.
- Customer B has 32 division offices (all of which negotiate their own pricing), orders frequent LTL shipments of mixed pallets, deducts at least 10% of sales, diverts half your product to other retailers, and the thought of paying on time never crosses their mind. "Fair" isn't even part of the equation. It's a battle.
- It doesn't seem right. There must be a way to reward Customer A for helping you to reduce supply chain costs and, at the same time, incent Customer B to do the same.
- The good news is that there is an answer. It comes through a simple and practical use of costing methodologies through the
Acorn Systems Cost Analyzer.
- For a manufacturer this means that you can
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• Trace the cost of producing a particular item as an aide to SKU rationalization
• Trace the cost as this item is distributed to your downstream trading partners
• Identify which customers are more profitable and have assisted you in reducing total supply
chain costs
• Identify which customers have increased supply chain costs through complex pallet
configurations, less than optimal loads, frequent deliveries, late payments, and
unauthorized deductions
- Many manufacturers have used this information to implement pricing schemes (often called "Cost-to-Serve Pricing") that reward and incent those customers that work with you to reduce total supply chain costs.
- We make it simple, we make it practical, and we use your current general ledger and data processing systems to do it.
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Related Resources
- Full Life Cycle SKU Rationalization
- Bill Kadlec, Regional Vice President Acorn Systems
- With SKU Rationalization more important than ever, elimination of
unprofitable SKUs and improvement of marginally performing SKUs is just one
objective of SKU Rationalization initiatives. This white paper examines SKU
rationalization and the channel, capacity, cost to serve, packaging and
strategy components involved in optimizing a company's product and SKU
portfolio.
- »
Read Whitepaper
- Time-Driven Activity-Based Costing
- Robert S. Kaplan, Harvard Business School Steven R. Anderson, Acorn Systems
- This provocative new whitepaper uses concrete examples to
demonstrate how managers can obtain meaningful cost and profitability information, quickly and inexpensively
- »
Read Whitepaper
Acorn Systems Provides: Cost-To-Serve Software
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Acorns Performance Analyzer tool helps us visualize our companys cost structure in an
easy-to-understand model with a smooth flow of expenses all
- the way to cost objects.
- IT Director, Global 2000
Aluminum Company
Technology Features & Benefits Enterprise Performance Suite
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