Cost to Serve

Segment and develop the agility of logistics to meet a range of service offerings of growing complexity and size

In recent decades, companies have increasingly prioritized customer service, with the aims of meeting customers’ changing needs, differentiating themselves from the competition and creating loyalty.

The service offering covers several dimensions, including the classics:

  • Product availability lead time, authorized frequency of order, punctuality
  • Flexibility in terms of the required volume and mix
  • Level of product customization
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  • Added-value logistics services (point-of-consumption delivery, kitting, specific product mix, customization, etc.)
  • Inventory management (inventories in advance, consignment, Activity-Based Management (ABM), etc.)
  • Methods and media for customers to state their needs, order confirmation, order monitoring and tracking
  • Sales front office and multi-channel management (single-client point of contact)
  • Pricing and invoicing methods

The main issues are:

  • Failure to adequately provide the real value of the services offered to the customer
  • Absence of any real control over the service cost and customer profitability trend
  • Complexification of the Supply Chain, generated by the abundance of services on offer
  • Difficulty of ensuring a good service level

In fact, the operational implementation of service offers can have an impact on:

  • Customer relationship (organization, channels and specific processes for interacting with the customer)
  • Location and inventory level
  • Logistics infrastructure (number and location of platforms)
  • Supply Chain processes (demand, production and supply management, order-taking, and inventory allocation)
  • Supply Chain model itself, in some cases (make to stock -> assemble to order -> configure to order -> engineer to order)

Given these issues, the service offer portfolio may be redesigned with two aims:

  • Standardizing what can be done: simplifying processes, pooling costs, etc.
  • Differentiating what needs to be done: focusing on certain customer segments, potential for direct or indirect revenue, etc.

There will be some pre-requisites:

  • Sounding out the market (consultation of sales forces, customer and prospective customer surveys, competitor analysis) in collaboration with Marketing and Sales departments
  • Segmenting customers (sales potential, customer appeal, current/forecast profitability, logistics behavior, and stated expectations)
  • Segmenting service offers (basic, differentiated) and providing an impact analysis on Supply Chain and logistics processes to go with the definition of offers
  • Matching offer segments with customer segments based on sales strategy (competitive investment, customer negotiation lever, service billing)
  • Analyzing the costs incurred with various scenarios for the deployment and possible billing of the service offer, defining the point of equilibrium between the additional cost and revenue
  • Once the scope and the potential of the service offers has been validated, planning their deployment in accordance with deadlines for the implementation of organizational, process, infrastructure and information technology requirements
  • Managing change in the relevant departments, and customer communications

How can Argon Consulting help you?

Argon Consulting supports its B2B, B2B2C, and B2C clients in redesigning their service offering, covering every stage from the design to the implementation of new service offers.

Case Studies

Definition of a target distribution master plan to support the development of high added value activities in Asia/Pacific countries