Customer and product profitability analyse (Cost To Serve)
Customer and product profitability analyse (Cost To Serve)

Customer and product profitability analyse (Cost To Serve)

Where does the company profit actually come from?
The company profit is the total result of the delivery of all products and services to the customers of the company. But is it clear how it is built up? There may be customer or product groups that contribute relatively more to the profit. Or are there segments that are loss making, which is compensated by other categories. This is essential information for strategic decisionmaking and for setting priorities in improvement plans.

Often the information about this from the financial system is not very useful because:

  • the cost prices of product categories are not kept up to date;
  • certain costs are charged with an equal percentage across all products;
  • material losses are not properly included in the cost prices;
  • changeover times of production lines are not included per product;
  • customer-specific services are not included separately.

 

A pragmatic approach to gain insight based on Activity Based Costing
Activity Based Costing is a well-known technique, but can be difficult due to the amount of details. LogiLex's approach is to draw up a tactical/strategic cost model at customer and product group level, in order to gain an initial insight into the structure of the total profit. Thereafter, it is possible to focus more on specific categories. For this analysis,  a proven and frequently used software model from a partner is used. The costs are analyzed and allocated on the basis of clear allocation keys. Sensitivity analyzes of assumptions made and of changes in the business situation can be easily done.

LogiLex's role in customer & product profitability analysis
LogiLex can take care of the project management of such an initiative. The advantage of external involvement is that cost items and allocations used are challenged. 

LogiLex can be used for, among other things:

  • project design, planning and management;
  • coordinating cost data collection;
  • advising on and contribute to (re)allocation of cost categories;
  • building the cost model;
  • translating model results into possible measures.

 

LogiLex's experience in Activity Based Costing and Cost To Serve

  • Cost To Serve analysis of a distributor function (Diversey);
  • analysis of standard delivery conditions at customers (Diversey);
  • logistics cost model for use in S & OP (Diversey);
  • Activity Based Costing budget for logistics operations (Diversey);
  • Cost To Serve analysis of ice distribution (Unilever);
  • customer profitability analysis at a logistics service provider (Tibbett & Britten / DHL).
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Lex’ structured way of working, seniority and the speed in which he acquainted himself with our business were impressive. I highly recommend him for operational and strategic supply chain assigments.

[name] => VP Supply Chain, Nobia ) [1] => stdClass Object ( [id] => 4 [text] =>

A committed colleague who takes his responsibilities seriously. Pursuing the agreed business targets but not losing sight of the interests of the stakeholders involved. In short: a great colleague to work with.

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Despite high time pressure, a thorough RFQ process has been carried out, in which Lex had an important role with his thoroughness and humor. A sound foundation for a successful implementation with the selected provider.

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During the many years I worked with Lex, he lead many succesful initiatives and implementations. I would recommend him to any organization who needs Supply Chain and Logistics leadership and expertise, with a good track record of delivering results.

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Great appreciation for the input Lex Kop gave to the distribution logistics roadmap for China. His down to earth approach, sharp analysis and open feedback greatly contributed to our thinking.

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Our succesfull outsourcing project in Brazil has been achieved with the excellent integration of the experience, knowledge and commitment of Lex Kop.

[name] => Supply Chain Director, Gessy Lever Brazil ) [6] => stdClass Object ( [id] => 9 [text] =>

Many thanks to Lex Kop for the excellent job done on the ice-cream cost reduction project and also for the patience demonstrated in handling such a project in difficult business environment.

[name] => Marketing Director, Unilever Hungary ) [7] => stdClass Object ( [id] => 10 [text] =>

During my first years working at Unilever, Lex gave me the opportunity to understand how logistics work and that a simple way of thinking is usually the best way to solve very difficult problems. A great mentor !

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A great organizer who makes sure the project stays on track.

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Where does the company profit actually come from?
The company profit is the total result of the delivery of all products and services to the customers of the company. But is it clear how it is built up? There may be customer or product groups that contribute relatively more to the profit. Or are there segments that are loss making, which is compensated by other categories. This is essential information for strategic decisionmaking and for setting priorities in improvement plans.

Often the information about this from the financial system is not very useful because:

 

A pragmatic approach to gain insight based on Activity Based Costing
Activity Based Costing is a well-known technique, but can be difficult due to the amount of details. LogiLex's approach is to draw up a tactical/strategic cost model at customer and product group level, in order to gain an initial insight into the structure of the total profit. Thereafter, it is possible to focus more on specific categories. For this analysis,  a proven and frequently used software model from a partner is used. The costs are analyzed and allocated on the basis of clear allocation keys. Sensitivity analyzes of assumptions made and of changes in the business situation can be easily done.

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LogiLex's role in customer & product profitability analysis
LogiLex can take care of the project management of such an initiative. The advantage of external involvement is that cost items and allocations used are challenged. 

LogiLex can be used for, among other things:

 

LogiLex's experience in Activity Based Costing and Cost To Serve

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