At a time when margins are under increasing pressure, collaboration between Consumer Packaged Goods (CPG) suppliers and supermarkets is crucial. By understanding the Cost to Serve (CtS) and sharing data, inefficiencies in the supply chain can be addressed. This leads not only to lower costs, but also to competitive advantage and sustainable growth.
What is Cost to Serve?
Cost to Serve provides a detailed overview of all costs associated with serving customers and delivering products. These include transportation costs, storage costs and operational expenses such as order processing and specific delivery requirements.
Example: Customers who place small orders daily incur significantly higher costs than customers who order less frequently but in larger volumes. Without insight into the CtS, these hidden costs often remain invisible, putting unnecessary pressure on margins.
The Supply Chain Challenges
Both CPG suppliers and supermarkets face rising costs and changing consumer demand:
- Suppliers: Transportation and production costs increase due to small, frequent orders and complex delivery requirements.
- Supermarkets: Inefficiencies in stocking and inventory management increase operational costs and logistics burdens.
Many of these costs remain hidden without a data-driven approach. Consider:
- Dispersed deliveries: Small quantities increase transportation and administrative costs.
- Frequency of orders: Daily or small deliveries make logistics processes more complex and costly.
- Special delivery requirements: such as refrigerated transport or time-specific deliveries, which further drive up costs.
Without an understanding of true costs, optimization fails to occur, leading to distorted margins at both ends of the value chain.
Data sharing】.
Collaboration and transparency are essential to reduce costs and optimize processes. Data sharing between suppliers and supermarkets enables:
- Optimize ordering behavior: By sharing data on ordering patterns and volumes, larger and less frequent orders can be planned. This reduces transportation costs and administrative burdens.
- Making transportation more efficient: Access to demand and inventory data improves route planning, minimizes empty trucks and increases delivery reliability.
- Improve inventory management: Real-time data sharing helps better align production with demand, preventing waste and shortages.
- Offer incentives and discounts: Suppliers can offer volume discounts for larger, consolidated orders, providing cost savings.
The Joint Benefits
CtS data sharing creates benefits for all parties involved:
- For suppliers: Lower transportation costs, better production planning and stronger customer relationships.
- For supermarkets: More control over inventory management, lower operating costs and more reliable delivery.
- For consumers: Less out-of-stocks and better product availability, leading to higher customer satisfaction.
How Finext Supports Collaboration
At Finext, we believe in the power of simplicity and collaboration. Our experts help suppliers and supermarkets using advanced data analysis tools and strategic advice:
- CtS data insight at the customer and product level.
- Identify and eliminate supply chain inefficiencies.
- Develop collaborative strategies that lead to lower costs and better margins.
With a data-driven approach, we ensure that your supply chain becomes not only more efficient, but also more profitable. Want to know more please contact Alwin Dooijeweerd
