Few companies can say they have true visibility into their profitability, including which of their products or customers are the most or least profitable, or where their products accrue costs as they travel through the supply chain. Amid inflationary pressures creating additional stress on profit margins, companies with a greater understanding of cost absorption through a cost-to-serve program can identify opportunities to improve profitability.
BDO’s Management Consulting professionals deploy cost-to-serve programs to help companies better understand their businesses and improve profitability. Consider a company that needs to raise its prices but lacks the data to justify that decision. With the results of a cost-to-serve analysis, a company can justify adjusting its prices when negotiating with clients and vendors. We also see companies gain insight into the potential cost of their new business pipeline, which enables decision-makers to offer better quotes for prospects or assess whether there is capacity to take on a new project.
Learn more about our approach and how we’ve helped various companies use cost-to-serve to improve profitability.
A methodology for measuring the true activity costs associated to meeting customer specific needs at a customer and product or service level. Typical questions that prompt a cost-to-serve engagement include:
1Inclusive of Materials, Labor, Equipment, Manufacturing Overheads, etc.
2Examples: Cost Per Machine, Machine Setup, Machine Hours, etc.
3Examples: Customer Warranties, Rebates, etc.
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