Consumer Packaged Goods

Cost-to-Serve Analysis – A Business Imperative for CPG Manufacturers

The primary manifestation of VUCA (Volatility, Uncertainty, Complexity and Ambiguity) for the consumer packaged goods (CPG) industry is its impact on profitability and margins. Dollars need to work harder in today's environment especially for the CPG industry, battered as it is by powerful retailers, volatile consumer spending and rising competition.

To mitigate the impact of VUCA and thrive in such an environment, CPG companies must strengthen their financial monitoring capabilities. This will enable them to reduce costs and improve profit margins. However, this is possible only if an organization has accurate insights into costs and is able to monitor it very closely.

Cost-to-Serve (CTS) Analysis offers a comprehensive cost and profitability management solution. It helps understand customer-wise 'cost to serve' for a particular product or product category across various cost dimensions including procurement, manufacturing , distribution, logistics (inbound and outbound), and sales. The analysis can lead to significant
improvements in customer management , product management and profitability management—in turn leading to improvements to the bottom line.

This paper examines the impact that cost-to-serve analysis can have on an organization's ability to manage costs and improve profitability.

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