In Part Two of this series, we defined Transparent Cost-to-Serve Customer Relationships and explored potential steps in the journey to achieving it. Here in the third and final part, we look at the types and magnitude of improvements to expect from a TCR initiative.
The same system that delivers the TCR (Transparent Cost-to-Serve Customer Relationships) capabilities that drive these savings (as described in Part Two) also provides the means to precisely measure the sales, customer, and profit impact. In phase one, businesses can gain sizeable wins in transportation and warehouse costs by concentrating on known areas of opportunities that have been difficult to execute in the past. The capabilities implemented in phase two (Accurately Modeling, Predicting, and Optimizing Cost-to-Serve) provide tools to more accurately measure ‘before’ and ‘after’ costs, helping provide business justification for continued investments.
Typical Expected Improvement Metrics
Typical improvements that can be expected from implementing a system like Synapsum are shown in Table 1 below. These are organized into two categories: 1) Optimization Metrics — Improving Cost-to-serve Alignment, and 2) Top Level Metrics — Overall Business Improvement.
Table 1 – Typical Benefits from Implementing Synapsum
Getting Started – 3 Steps
Synapsum can be implemented quickly as a SaaS extension to augment existing systems. You can get started with the three steps outlined below. If you would like help with this exercise, please contact Synapsum.
- Identify the main customer and order influences driving cost in your supply chain — Figure 1 below shows some common areas of supply chain cost influences experienced by other organizations.
Once identified, size the benefit by quantifying the cost impact on margin using easy-to-access sample data (e.g., comparing the profitability of two customers or segments of customers — one with and one without the requirements identified). By doing so, you will understand the potential benefit and where to prioritize focus.
- Pinpoint process changes to make that would change the outcome — Identify specific desired changes to customer relationship and selling process, at specific stage(s), to reduce or recoup costs. Some examples are shown in Figure 2 below. Once identified, consider whether there are points even earlier in the process that will have an impact (e.g., offers and promotions, product and assortment decisions). For online buying experiences (not pictured below), similarly consider what changes to the steps in the customer buying cycle would drive the greatest impact.
- Differentiate process changes (actions and approaches) by customer segment, where it makes sense to do so — Segment your customers into a matrix of contribution margin vs. customer value (see customer segmentation matrix example in Figure 3 below) and follow these steps:
- Pick a sample customer account with active demand in the lower left quadrant where customer sales value and profit contribution are low.
- Consider how that customer’s position in the diagram would change if you implement the process changes that you identified in step 2 and applied them to this customer. Will you gain or lose revenue or lifetime value from this customer? Will you gain or lose profit margin with this customer? Based on the answer, do you need to change anything you outlined in step 2, to achieve a better outcome?
- Repeat this assessment again for a customer account in each different section of the chart. Note if the recommended actions differ and if so, why.
The result of this 3-step exercise should offer you a working framework to achieve improved results and bridge the divide between finance, operations, business, and customer-facing functions.
To view other articles from this issue of the brief, click here.