Service Cost Reduction - Cost to Serve Analysis

 

https://www.accenture.com/nl-en/services/infrastructure/service-management

https://www.accenture.com/id-en/insights/technology/customer-service-management

Modern, automated and intelligent

It’s time for companies to trade their increasingly inefficient and ineffective traditional service model for a modern, automated and intelligent one that delivers the service experience today’s and tomorrow’s customers want.

https://www.ey.com/en_cz/consulting/intelligent-automation-consulting-services

What is a Cost to Serve model?

Cost to Serve and margin model calculates costs and profitability of each delivery, providing aggregations across any dimension (customer, segment, delivery type, etc.). We use Cost to Serve methodology to map costs to operational reality and based on that allocate costs of the whole company to its products/services. Costs and revenues are allocated to a very granular level in order to arrive at gross margin at any desired aggregated level.

Infosys Portland developed a cost-to-serve data visualization model for the client, that helped identify profit improvement opportunities valued at more than 5% of the in scope spend.

https://www.infosysbpm.com/portland/resources/case-studies/understanding-the-cost-to-serve.html

https://www.infosysbpm.com/portland/resources/case-studies/documents/understanding-the-cost-to-serve.pdf

Cost-to-serve measurement and customer profitability analysis

November 2008, The International Journal of Logistics Management 19(3):389-407

https://www.researchgate.net/publication/242021796_Cost-to-serve_measurement_and_customer_profitability_analysis

The term “cost-to-serve” has been used to describe customer-service costs by several authors (Kaplan, 1989; Cooper and Kaplan, 1998; Braithwaite and Samakh,1998; Kaplan and Narayanan, 2001); indeed, Braithwaite and Samakh (1998) evenregistered the Cost-to-Serve” brand. 

In the costing process of different objects, such as customers and marketingchannels, Kaplan and Cooper (1998) recommended the allocation of sales, marketing, distribution and administrative (SMDA) expenses to the costing objects, in accordance with the proposal of Christopher (1997). Kaplan and Cooper (1998) noted that such an allocation of expenses is not usually applied to customers – because it is generally considered that these expenses are fixed and that any allocation would be random and confusing. However, in view of the growth of these expenses in all companies, Kaplan and Cooper (1998) argued that they are not actually fixed costs but they could not be considered variable costs – because they are not directly influenced by sales volumes. Therefore, Kaplan and Cooper (1998) created a distinctive categorization to be applied to SMDA expenses – super-variable” expenses. In an effort to identify the ABC method, Anderson and Kaplan (2004) proposed  a so-called time-driven ABC”. The novelty of this approach is its emphasis on time as an activity-time driver and its determination of the unit times of services and non-used capacity time. In this research “cost-to-service” is  the cost of the administrative, commercial, and logistic activities related to customer-service delivery, as measured through the ABC methodology.

Activity                                   Cost drivers

Distribution                            Quantity and weight of SKU transported

Warehousing                          Quantity and weight of pallets handled

Billing                                    Quantity of bills issued

Sales                                       Time and type of salesman visit

Sales promotion                     Time and type of promoter visit

Merchandising                       Commercial contracts

Collecting                               Quantity of bills collected

Prashant Kale (PGDIE, NITIE)  https://www.linkedin.com/in/prashant-kale-5496356/