Supply Chain - Cost to Serve Modelling

Businesses generally have a good understanding of their logistics and supply chain costs, as an overall percentage of revenue, or in terms of cost per item, case or pallet. What is often less well understood are the supply chain costs relating to a specific product, a particular customer or a given distribution channel.

Cost to Serve Modelling is used to allocate costs for each activity within the supply chain, based on ABC costing principles.

The outputs from such modelling exercises often provide interesting insights. Buyers can be provided with cost models that allow them to understand the supply chain costs for specific items, which may change their assessment of which products are truly profitable. Operations managers can allocate products and customers to Distribution Centres in the most cost effective way. Contract management is enhanced by understanding the supply chain costs relating to specific customers.

Total Logistics has developed a number of Cost to Serve models within its Insight suite of supply chain and logistics tools.

Total Logistics provides practical strategic supply chain consultancy across all industry sectors throughout Europe and the rest of the world. For more information contact us on +44 (0)118 977 3027, or send an e-mail to info@total-logistics.eu.com.

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This Supply Chain glossary article was last updated on 8th November 2007