Cost 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 summary to specific customer or order. This has been a key component in our customer’s ability to determine cost plus pricing or menu based pricing. With robust “what-if” capability, our customers are also able to understand cost plus estimating or bidding.
They say that you should love your customers, but that's not always easy to do. Don't you get tired of selling to your customer's at the same price when you know that one costs you significantly more to serve than another?
Take the case of a services provider or manufacturer.
Cost to Serve Example for Service Provider:
Customer A places 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 and even set up automated
payments from his checking account. It’s not surprising that
he also purchasing your most profitable products.
Customer B has only 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 that you can identify which customers are more profitable and have enabled you to reduce total service costs, versus those that have increased service costs through high touch service models, late payments and peak capacity usage. This, in turn, will help you to perform better customer segmentation. It also means you can trace not only the cost of providing a particular service as an aide to rationalize your service offering, but also the price you might consider for outsourcing your services. It will help you to determine the cost to serve at various levels of capacity utilization and will guide you to make the best staffing and outsourcing decisions.
Many service providers have used this information to implement Relationship or Segment Pricing that reward and incent those customers that that migrate to low cost service models.
We make it simple, we make it practical, and we use your current General Ledger and data processing systems to do it.
Cost to Serve Example for 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 divisional 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 trace not only the cost of producing a particular item as an aide to SKU rationalization, but also the cost as this item is distributed to your downstream trading partners. It will help you identify which customers are more profitable and have assisted you in reducing total supply chain costs, versus those that 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.