Logistics and Supply Chain Management, 6th Edition

Understanding the cost-to-serve

We have already observed that whilst most companies have very good insight into product-related costs, they often know little about the costs of serving customers. This is paradoxical given that the difference between profit and loss is often determined by what happens after the product leaves the factory. Of equal concern in this era of omni-channel distribution is that the costs associated with serving customers through different channels may not be immediately visible.

The problem is that conventional cost accounting systems, as we have observed, tend to be focused around ‘vertical’ functions rather than ‘horizontal’ flows. These flows can relate to the processes that are involved in servicing of customers. ...