Detailed Cost to Serve Lesson

[@supplychainsecrets]

This video is brought to you by Logistics Bureau - Management Consultants, who reduce costs and improve service for organisations Worldwide. If you need any assistance on any of the topics on this channel, just visit us at: www.logisticsbureau.com/

[@moisekazembe7894]

Hey Sir I am Supply Chain Management student at Western Michigan University in The USA. This video just blew my mind and the crazy thing in this video is that your analysis is done on a real case . I am going to wacth it several time to just boost my 🧠🧠. Thank you for the Education

[@supplychainsecrets]

Glad it was helpful!

[@muhumuzabernadette1122]

oh my gosh I didn't know.this existed. this is revolutionary

[@supplychainsecrets]

If there was just one thing I could teach about Supply Chain, it would be this! Glad it made sense.

[@jonasedvardsson9422]

Great example, thanks for the thorough review

[@supplychainsecrets]

Glad it was helpful!

[@ethiopianlogisticianscommunity]

wow, was ammaizing sir! thank you so much!!! now, we need to know how to minimize or totally avoid those hidden costs by example.

[@supplychainsecrets]

I think it's one of the most important Supply Chain concepts to understand!

[@ethiopianlogisticianscommunity]

@@supplychainsecrets in deed sir!

[@lirva7611]

The quality of your content is incredible. Thank you for sharing! Liked the video, and also subscribed to your channel.

[@supplychainsecrets]

Thank you very much! Tell your friends 😀

[@socalslk]

Thank you. I find case studies one of the most useful tools for learning. I did go through a similar exercise for a specialty retailer. It is eye opening when you start to attribute all of the handling and carrying costs to every line item. Getting product data and moving paper purchase orders, invoices, and checks can eat up all the margin of small orders. Dealing with distributors that use electronic data interchange can leave enough margin to cover people and facilities, but if you get lots of mis-ships, substitutions and free fills each one eats your margin like a small order.

[@supplychainsecrets]

Scary isn't it!

[@supplychainsecrets]

And I agree, this one is better without the music. Thanks for suggesting it.

[@socalslk]

@@supplychainsecrets Thank you for giving it a go without. It isn't quite as noticeable in other videos. The clarity of just your voice after the introduction in this one is remarkable.

[@socalslk]

@@supplychainsecrets I love finding waste and minimizing it. Organizations either love me or hate me. One common approach is to throw technology at a problem. If you throw technology at a waste problem, you exacerbate it. Giving that warning, being ignored, and then proven right is an expensive learning curve. Do you do short pilot studies with new clients to see if they are going to be willing to accept the truth? I am at a point in my career where I want to learn this up front and decline the job so I can move on to a place where my work will be effective. Not fixing problems is not rewarding.

[@supplychainsecrets]

@@socalslk An interesting approach. I tend to 'test the water' with a potential client at our early scoping meetings. If I sense they might be difficult to work with or unlikely to make changes..........then maybe we are a bit too busy to help :-)

[@frankloots1456]

Thank you very much for this video! About to start a project on cost to serve, very helpful and a clear explanation!

[@supplychainsecrets]

Good to hear! Let us know how it goes.

[@rolandoriley]

Cost of Serve . ... such an exciting topic. In your opinion what should be a fair percentage incidence over the margin of a SKU of the Warehouse operations cost?

[@supplychainsecrets]

It varies a lot depending on the business, the customer profile, demand profile etc. But warehouse cost as a % of sales is generally 2-4%.

[@rolandoriley]

@@supplychainsecrets Thank you for sharing. Is there any reading that specialize on this subject Cost of Serve - waherhouse approach. Costing can get complex when you manage shifts on human resources and the process are time sensitive

[@supplychainsecrets]

@@rolandoriley Sorry, I'm not aware of any suitable readings.

[@iveyhealth2266]

Great info! Very informative!

[@supplychainsecrets]

Glad it was helpful!

[@shamilpatel9031]

Thanks for the video, very useful! Would you also build up your CTS per SKU/item on transportation in the same way as thew warehousing, with the fixed costs of the vehicle being allocated to the proportion of cubic space each SKU fills up within the vehicle?

[@supplychainsecrets]

Yes that could be a good method.

[@vincer9017]

Hi, very nice video explaining concept of cost to serve. How would you allocate costs for all activities prior to actual picking for SKU's that werent sold. You did receive them, quality check them, put them on stock and have them taking up m3 space in your warehouse. Would you spread those costs over the actual orders sold? and what would be a good method of doing that?

[@supplychainsecrets]

If you mean SKUS with zero sales, I would question why you are holding them. If you mean the ‘extra’ unsold stock of SKUs that are being sold, then Yes. The cost of storing that inventory is included in the CTS calculations.

[@chukstheanalyst]

Thanks, it was insightful

[@supplychainsecrets]

glad you found it useful.

[@abdulshkuradem7651]

Thank you very much!

[@supplychainsecrets]

You're welcome!

[@anthonymacon6778]

Could one also use activity based costing in the same framework and get the same results?

[@supplychainsecrets]

Yes, Activity Based Costing (ABC) is very similar. Though Cost to Serve (CTS) analysis takes it deeper and also accounts for product and customer characteristics. It's kind of ABC on steroids!

[@bobcocampo]

Great presentation

[@supplychainsecrets]

Glad you think so!

[@rolandostreber9485]

Hi Rob, Thank you for sharing your knowledge with the rest of the supply chain community. Is the cost to serve analysis similar to a SG&A analysis (drilled down to an specific level or area of an organization)? In order to get a better perspective in the CTS analysis, I find very helpful to add as much information as possible to the table (such as: customer, product group, etc.).

[@supplychainsecrets]

Yes, it's a very similar approach. THere are quite a few CTS videos on the channel, some in detail, that will help.

[@bobcocampo]

How about cost for stocks that are not moving compared with fast moving

[@supplychainsecrets]

In a cost to serve study that is taken into account, because part of the cost is the number of weeks the product remains in storage.

[@bobcocampo]

@@supplychainsecrets Do you use volume-days as a cost to serve?

[@supplychainsecrets]

@@bobcocampo Not sure what you mean by volume days? The approach I use is explained on the video.

[@bobcocampo]

@@supplychainsecrets In maintenance management we use kwhr to predict failure of an electrical equipment. Instead of just volume, I wonder if the cost will be based on how long the stock is in the warehouse by multiplying volume cost with the number of days the stock is in the warehouse as an average. Or actual. Just a suggestion. Time of dispatch minus time of arrival.

[@supplychainsecrets]

@@bobcocampo That's how we do it. Based on stock turns.

[@ningtanumat3448]

When will you come back to Bangkok again? I would like to invite you visit our warehouse.

[@supplychainsecrets]

When travel is allowed. So probably not till 2022 sadly

[@tristanhoran1347]

Aren't these overhead costs already built into gross margin for most companies?

[@supplychainsecrets]

They should be! But most companies don't understand them at a customer and product level.

[@bobcocampo]

What is MHE?

[@supplychainsecrets]

Materials Handling Equipment. Example a Forklift.

[@bobcocampo]

@@supplychainsecrets Thanks