Global FMCG Manufacturer
Cost to Serve
A global FMCG manufacturer wanted to understand the true Cost to Serve of every SKU to every retailer shelf / distributer rack. The challenge was to compile all the supply chain costs with those of the commercial teams: everything from picking costs to merchandising visits. Collating disparate costs across numerous systems was part of the challenge, along with identifying appropriate drivers to allocate costs and ensuring the realities of the supply chain were captured in the modelling. Sequoia's ability to create one-off, complex, detailed models was deployed as a proof of concept, identifying unanticipated opportunities and operational insights.
Problem
- Identifying the true end to end Cost to Serve to the Customer of every SKU in the portfolio
- Ultimately the aim was to create an integrated tool to calculate CTS and scenario test that the commercial and supply chain teams could use for pricing and cost saving
- Due to the myriad of systems there was some doubt this would be feasible
Solution
- Sequoia conducted a pilot Proof of Concept study to assess the feasibility of creating and deploying such a tool
- This initially involved comprehensive interviews to understand the (sometimes competing) functional requirements of all key stakeholders – an essential step to then agree what would be included in the PoC project
- After establishing a clear view of the data and systems landscape, a highly granular set of supply chain, logistics and commercial data was collated and mapped into SQL from a set of disparate systems
- Activity-based cost allocations were agreed and then applied within the model across the stages of the Supply Chain
- Results dashboards facilitated stakeholder engagement and drill down to identify specific opportunities
Impact
- A comprehensive model was created which dealt with the complexities of the overall challenge and provided actionable insights for the pilot market: conservatively the PoC estimated an opportunity to save $40m, split across various go to market channels. This opportunity was previously hidden and unquantifiable
- A review of the industrialisation & deployment opportunities was completed, with the project marked as one which could deliver:
- Identify opportunities to reduce excessive Supply Chain or Sales & Marketing costs
- A focus on channel / location / brand / warehouse to understand opportunities
- Challenge network design based on actual Cost to Serve
