Cost-to-Serve (CTS) Analysis (PowerPoint PPTX Slide Deck)

DESCRIPTION

This product (Cost-to-Serve [CTS] Analysis) is a 25-slide PPT PowerPoint presentation slide deck (PPTX), which you can download immediately upon purchase.

Supply Chains across industries are being revolutionized at a rapid pace by technology. By implementing technology systems, Supply Chain organizations aspire to eliminate waste, meet customers' needs at reasonable costs, and ensure profitability. Enterprise Resource Planning (ERP) systems facilitate in processing unstructured data at an aggregated level. However, at workflow or micro level the data produced through ERPs needs to be further refined to understand costs.

This presentation provides a detailed overview of the Cost-to-Serve Analysis Framework, which provides Supply Chain professionals the means to identify the total cost of serving customers—including all the costs in a product's value chain (from raw material to delivery)—at product as well as customer levels. Failure to identify negative-margin products and customers debilitates profitability. We can conduct CTS Analysis to prevent this.

CTS Analysis can divide the entire Supply Chain into multiple tasks, while calculating the costs at every task, helps the Supply Chain practitioners calculate costs at various levels. The CTS Framework entails 5 steps:

1. Obtain Buy-in from Key Stakeholders
2. Conduct Cost Categorization
3. Determine per Unit Cost Breakdown
4. Develop Classification Matrices
5. Make Joint Decisions

Other topics covered in this deck include Activity-based Costing (ABC), ABC vs. CTS, key objectives of using CTS, and Classification Matrices.

The slide deck also includes some slide templates for you to use in your own business presentations.

The Cost-to-Serve (CTS) Analysis presentation is a powerful tool for executives aiming to optimize their supply chain operations. It provides a comprehensive framework for identifying cost drivers at every stage of the supply chain. The PPT includes detailed steps for obtaining stakeholder buy-in, conducting cost categorization, and developing classification matrices. It also highlights the importance of accurate cost modeling for individual customers and products to enhance profitability. This presentation is essential for leaders looking to make data-driven decisions and improve their bottom line.

Source: Best Practices in Supply Chain Management, Activity Based Costing, Cost Analysis PowerPoint Slides: Cost-to-Serve (CTS) Analysis PowerPoint (PPTX) Presentation Slide Deck, LearnPPT Consulting

PPT SLIDE DEEP DIVES

Comparative Analysis of Cost Management Methodologies

This PPT slide presents a comparative analysis of 2 cost management methodologies: Activity-Based Costing (ABC) and Cost-to-Serve Analysis (CTSA). Both approaches aim to enhance profitability through better understanding of costs associated with products and customers.

The left side outlines the ABC framework, which focuses on allocating indirect costs to various cost drivers within a supply chain model. It emphasizes the importance of identifying "invisible" costs that may not be immediately apparent. ABC is primarily utilized by finance departments to forecast budgets across different organizational activities. The slide notes that without this method, companies risk misjudging the financial implications of changes in product mix or volume, which can lead to poor decision-making. ABC is described as comprehensive, but potentially time-consuming, as it requires a detailed breakdown of all activities related to indirect cost pools.

On the right side, CTSA is introduced as a more precise alternative. It shares similarities with ABC in terms of allocating indirect costs, but goes further by examining invisible costs in greater detail. CTSA can be applied directly to sales items at the point of transfer to customers, allowing for a more granular analysis of costs associated with each transaction. The methodology is positioned as superior in its ability to model both value-added and non-value-added activities, linking them to relevant cost pools. This detailed modeling is crucial for organizations looking to optimize their cost structures and improve overall profitability.

The slide effectively highlights the distinctions and applications of both methodologies, providing a clear rationale for organizations to consider CTSA for more accurate financial insights.

Cost-to-Serve Framework: Steps for Strategic Cost Analysis

This PPT slide presents the Cost-to-Serve (CTS) Framework, a structured approach for organizations to analyze costs across various dimensions such as products, customers, and geographies. It emphasizes the importance of understanding cost drivers within the entire value chain. The framework is designed to assist supply chain practitioners in breaking down costs through an activity-based modeling algorithm. This method allows for detailed cost calculation at multiple levels, which is crucial for informed decision-making.

The framework consists of 5 key steps. The first step involves obtaining buy-in from key stakeholders, which is essential for ensuring alignment and support throughout the process. Next, conducting cost categorization helps in organizing costs into meaningful groups, facilitating a clearer analysis. The third step focuses on determining the per-unit cost breakdown, allowing organizations to understand the cost implications of individual products or customer segments.

Developing classification matrices is the fourth step, which aids in visualizing and comparing costs across different categories. This step is vital for identifying patterns and insights that can drive strategic decisions. Finally, the framework culminates in making joint decisions based on the insights gathered. This collaborative approach ensures that all relevant parties are involved in decision-making, leading to more robust outcomes.

The structured data generated through the CTS analysis not only highlights cost-saving opportunities, but also informs strategies for product profitability. This framework is particularly useful for organizations looking to optimize their supply chain costs while enhancing overall profitability.

Strategic Customer Classification for Profit Optimization

This PPT slide presents the Customer Classification Matrix, a strategic tool designed for organizations with a diverse customer base, but fewer product offerings. It categorizes customers into 4 distinct quadrants based on their profitability and revenue contributions. The matrix serves as a guide for decision-making, enabling firms to take targeted actions to enhance profitability.

The upper left quadrant identifies "winners," characterized by high profitability and revenue. The recommended action here is to protect these customers from competitors, ensuring their loyalty and continued contribution to the bottom line. In the upper right quadrant, "learners" are noted. These customers have potential, but require monitoring, as they may transition into the winner category or slip down into less favorable classifications.

The lower left quadrant features "improve/invest" customers, who are less profitable, but still generate significant revenue. The suggested strategy involves investing in these relationships and possibly altering the go-to-market approach to improve their profitability. Conversely, the lower right quadrant is home to "losers," customers that yield low profitability and revenue. The matrix advises a decisive action to stop servicing these customers, freeing up resources for more profitable endeavors.

Overall, the matrix emphasizes the importance of strategic customer management. By understanding where each customer fits within this framework, organizations can make informed decisions that align with their profitability goals. The insights derived from this classification can significantly influence supply chain strategies and organizational objectives.

Strategic Insights from the Product-Customer Matrix

This PPT slide presents the Product-Customer Classification Matrix, a strategic tool designed to visualize the relationship between products and customers based on profitability and cost to serve. The matrix is divided into 4 quadrants, each representing different strategies for managing product-customer pairs.

The first quadrant highlights top-performing products and customers, indicating areas to celebrate and maintain. In contrast, the second quadrant showcases highly profitable pairs that require minimal investment to sustain. This suggests a focus on efficiency and retention for these relationships.

The third quadrant identifies low-profit pairs that necessitate investment and resources to elevate them into the first or second quadrant. This indicates a need for strategic intervention to improve performance. The fourth quadrant lists product-customer pairs that are underperforming and may be better off divested. This quadrant serves as a warning sign for potential resource drain.

Each bubble in the matrix represents a specific product-customer pair, with size uniformity indicating equal importance in analysis. The axes of the matrix are labeled with Profit Percentage and Cost to Serve, providing a clear framework for decision-making. The matrix encourages executives to assess where to allocate resources effectively, whether to invest, improve, celebrate, or divest.

Overall, this classification matrix is a valuable tool for organizations aiming to optimize their product and customer strategies, ensuring that resources are focused on the most promising areas while identifying those that may require reevaluation.

Detailed Cost Segregation for Effective CTS Analysis

This PPT slide presents an overview of Cost-to-Serve (CTS) Analysis, emphasizing the necessity for detailed cost definitions at the individual product or customer level. It begins by defining the typical practice of cost reporting, which often aggregates costs over time or by truckload. This generalization can obscure the true cost dynamics associated with specific products or customers. The slide argues that for effective CTS Analysis, a more granular approach is essential, despite the inherent complexity and labor involved in segregating these costs.

The description section outlines the challenges faced by supply chain executives when attempting to break down costs. It highlights that traditional cost definitions often include fixed or variable components, complicating the analysis. The slide stresses that accurate measurement is crucial for CTS Analysis and requires advanced analytical capabilities. An example from the biofuel sector illustrates the need for precise calculations, detailing the costs associated with producing and transporting a gallon of fuel. This example serves to ground the theoretical aspects of the analysis in practical application.

Furthermore, the slide introduces a formula for calculating profit related to a specific product for a customer. It lays out a straightforward equation that incorporates various cost components, reinforcing the importance of understanding cost structures in order to optimize profitability. The overall message is clear: effective CTS Analysis demands a rigorous approach to cost segregation, which can ultimately lead to better decision-making and enhanced financial performance.