Cost to Serve Fulfillment:
Is Cost-to-Serve Eating Your Margins?
As mentioned in our post, “Five Actions for Supply Chain Leaders in 2021,” step 4 focuses on the lowest “cost-to-serve” fulfillment while balancing higher order volumes with compressed order-to-delivery times. So how do you achieve that balance? Matching supply to demand is no easy task, let alone landing at the customer’s dock on time, in full, and at the lowest cost.
Your Data Will Teach You
The value of supply chain and logistics technology is well established. It permeates every corner of the supply chain, from automated storage and retrieval systems to telemetric trucks to RFID tags, producing enormous amounts of data. Yet with all this information, you and your network of trading partners and customers cannot pull all this data together in a valuable, single point of view of real-time data. Why is that single point of view (POV) essential? With a single POV of your supply chain events, you can make decisions based on what’s happening, as it happens and can gain clarity into true cost-to-serve.
Demands for frequent, mixed SKU orders to a nationwide network of DCs, coupled with fines for missed delivery windows, make some customers simply not profitable or considerably less profitable than others. You need to know your cost-to-serve, and not just big customers but all customers. Whether your objective is to reduce supply chain costs or improve on time, in full delivery, tracking your true cost-to-serve is mission-critical. Plus, you don’t want your staff pulled in every direction tracking down shipments when they need to be available for more strategic tasks.
Determining cost-to-serve, or total landed costs, requires connecting all the dots in your supply chain. That may sound like an impossible task, but it offers a clear path to value if your trading partners are willing to collaborate (and they should be as part of your service agreement). A platform as a service (PaaS) solution such as the one offered by Activ Technologies provides a cloud-based platform to connect and integrate disparate data streams from all your trading partners into harmonious data sets from a technology standpoint. You can then leverage the analytical engines, data management tools, and dashboards to give you and your team visibility into what’s happening and use predictive analytics, alerts, and notifications to make better decisions.
Supply Chain Visibility Uncovers Options to Lower Cost-to-Serve
Supply chains are complex, dynamic ecosystems that offer multiple scenarios to arrive at the same place. This complexity produces hundreds if not thousands of solutions that address specific activities. The real need is one view of the data. Only then can you synchronize information from production to warehousing to transportation for final delivery. Only then can you proactively compensate for port congestion on inbound containers, truckload shipment delays, or delayed orders due to parts shortage.
When you can measure how each supply chain activity contributes to cost, you’ll have the tools to identify areas requiring optimization. Companies and their trading partners can synchronize forecasts, production, order and inventory management, and distribution capabilities. That synchronization improves operational efficiencies, customer service, and ultimately lowers cost-to-serve.
Analytics derived from integrated data from your systems and from your trading partners’ systems will generate insight into your cost-to-serve fulfillment metrics. These analytics becomes the foundation of data-driven decisions that enable your organization to replace best-guess decisions with real-time actionable intelligence.
Control Tower as the Start of Digital Transformation
Activ Technologies offers a platform as a service (PaaS) solution for integrating, benchmarking, and managing data in a way that creates visibility, service KPIs, and cost control throughout your network of vendors, carriers, distributors, and customers. ActiVate® can improve customer service for a better experience and greater transparency to all respective parties.
Use ActiVate to establish business rules with KPI’s that trigger exceptions. It may be as simple as measuring your carrier’s acceptance rate, on-time performance, and asset utilization, or as complex as identifying opportunities to align supply with demand. This analytical phase is followed by the decision-making phase, using the analysis results to refine a carrier strategy, initiate new procurement, revise modes or even redesign distribution. The process might involve the application of various technology solutions and new initiatives for high-cost customers.
As a multi-tenant, cloud solution, ActiVate is designed to connect supply chain partners, regardless of what systems they use for their business. For many users, ActiVate will be the starting point of the digital transformation of their supply chain, giving them access to a technology platform that is well beyond the capabilities of their legacy system. This integration, visibility, collaboration, and AI capabilities lead to better coordination of supply chain operations – all in real-time. ActiVate provides a digital control tower with the infrastructure, databases, APIs, and related technology without taxing client or vendor IT.
Predictive and Prescriptive Analytics: The Blame GameApril 21, 2021/