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TRANSACTION COST
FOCUS 31
It’s an analysis that allows you to fully understand the costs of the supply chain while supplying the evidence required to focus renewed investment in growth. For instance, at a time when most major retailers are seeking ways to better serve customers across multiple channels, typical wish-list items will include: Capital spending on warehousing; IT systems to provide improved visibility of stock; improved distribution networks; and enterprise resource planning (ERP) systems.
A cost to serve analysis identifi es where existing and potential value/savings lie along the supply chain. From the CFO’s perspective, this paves the way for more informed investment and trade-off decisions, which in turn maximise benefi ts to the organisation, while minimising impacts on customers.
Conquering ineffi ciencies
The business will be able to correlate cost to serve with actual product price and conclude, possibly, that some sales are just not worth the hassle. The exercise may also underpin moves to impose minimum order volumes and values so as to preserve margins. All of this is empowering. As a retailer, you can conquer ineffi ciencies inherent in your supply chain and focus on the most profi table customers and geographies, and the most optimal products and channels.
The upturn in the economy and subsequent competition for market share is a signal to retailers to rethink their multi-channel strategies. Sales are important, but not if they are made at a loss. It’s an environment where CFOs and fi nance teams are playing a pivotal role in deciphering the various demands that multi-channel buyers exert and their impact on overall profi tability.
Andrew Underwood, UK Head of Supply Chain Management Consulting T:+44 (0) 121 232 3886 E:
andrew.underwood@kpmg.co.uk
Andrew is a Partner in KPMG’s Management Consulting practice where he works with clients to identify and secure operational transformation opportunities. Andrew has particular experience in the agribusiness sector, working closely with a US Fortune 50 agribusiness in Europe. Andrew specialises in working with clients within the area of Tax Value Chain Management and has led, designed and implemented programmes across a number of sectors including consumer markets.
THE REAL VALUE OF A COST TO SEVERE MODEL IS FULL COST TRANSPARENCY – IT IMPACTS MANY FUNCTIONS (INCLUDING SALES, MARKETING, OPERATIONS, FINANCE, AND SUPPLY CHAIN), AND ENABLES INFORMED MULTI-FUNCTIONAL COST AND PRICING DECISION-MAKING AT BOTH A SKU AND CHANNEL LEVEL.
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Iain Prince, Director, Supply Chain Management Consulting T:+44 (0) 117 905 4257 E:
iain.prince@
kpmg.co.uk
Iain is a Director in our Operational Transformation practice and focuses specifi cally on Supply Chain issues in large and complex organisations. He has recently led work for major UK FMCG clients including GSK, Muller, ITG, and Warburtons. With over 18 years of Supply Chain and Logistics experience, Iain has worked extensively as a “trusted advisor” to COO’s, as well as Supply Chain and Logistics executives in major corporations.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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