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Cost To Serve
Challenges
Lack of granular cost/margin insights: Companies struggle to understand the true cost and margin to serve by customer, product, or supplier. While finance may know a product has a 20% margin, identifying which customers or products contribute to or erode this margin is difficult due to unclear end-to-end supply chain cost allocation.
Siloed systems and data foundations: Most companies rely on fragmented systems that lack the ability to link end-to-end supply chain activities and costs, making it hard to gain actionable insights.
Inefficient fixed cost utilization: Fixed costs, such as asset investments, are significant cost drivers. However, optimizing resource utilization to maximize efficiency requires a deeper understanding of cost-to-serve dynamics.
Sophus Solution
End-to-end cost-to-serve modeling: By automatically assigning all cost elements across the supply chain—from suppliers to plants, distribution centers, and ultimately to customers—this approach provides a clear view of costs for each product and customer.
Fixed cost allocation: Fixed costs are broken down into variable portions for each product path, enabling more precise cost allocation and optimization.
Detailed BOM and time/location tracking: The solution enables tracking of costs through detailed Bill of Materials (BOM) and across time and location, ensuring accurate capture of true costs and margins to serve.
Benefits
10–15%
cost reduction:
Improved asset utilization and optimized costs through better resource allocation and cost-to-serve insights.
Improved profitability per customer: Granular cost-to-serve insights enable tailored service tiers and pricing strategies, enhancing profitability.
Data-driven decision-making: Continuous insights support strategic supply chain decisions, ensuring long-term efficiency and competitiveness.
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