This concept discusses the usefulness of cost-to-serve model and offers additional insights into the model’s measurements and implementation steps.
Cost-to-Serve Model Definition
Cost-to-serve (CTS) is a method for assessing “the sum total of a large number of transaction costs which will vary by product, by market, by channel of trade, and …will vary between individual customers” (Gentles and Oliver, 1998: 763). It is these specific costs, as opposed to those linked traditionally to distribution cost-cutting programmes, that form the total cost-to-serve and help companies to make more informed strategic decisions (Gentles and Oliver, 1998).
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- Anderson, S. and Putterman, L. (2005) Building the Profit Focused Supply Chain: A Game Plan for Capturing Real Value. [online] Available at: (www.supplychainstandard.com/Articles/3724/Building+the+Profit-Focused+Supply+Chain.html) [Accessed on 13 January].
- Braithwaite, A. and Samakh, E. (1998) The Cost-to-Serve Method. International Journal of Logistics Management, Vol. 9(1), pp. 69-84.
- Christopher, M. and Gattorna, J. (2005) Supply Chain Cost Management and Value-based Pricing. Industrial Marketing Management, Vol. 34(2), pp. 115-121.
- CIPS: Activity Based Costing.
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