Transcript
Hello and welcome to another Bedford Consulting spotlight video. In this video, we’re looking at an overview of cost to serve within our plan. If you require an in-depth demonstration tailored to your specific requirements, then please get in touch. The contact details will be available at the end.
For those of you who are new to Anaplan, it’s a cloud-based connected planning platform used to model everything from sales and operations, financial plans, workforce requirements, and more. Cost to serve is actually a perfect example of Anaplan’s ability to connect data from across the business and the people involved. The result here is full cost to serve attributed to each customer and an understanding of their true profitability, rather than just a margin level.
Importantly, Anaplan can not only be used to understand historical cost to serve using actuals and allocations, it’s also able to see how that cost runs into the future based on planned demand and then allows you to quickly produce multiple planning scenarios. It could be for best case versus worst case or to answer specific questions. For example, what if we only sent out full truckloads, changed the customer’s incoterms, or raised that minimum order quantity?
First to the customer, opening one of our dashboards in the results section, we can see the core cost categories that we’re modelling to build up our cost to serve, specifically net sales, materials, and sourcing costs, total manufacturing costs, customer service, distribution, and any other central costs that we want to attribute to individual customers.
As with all Anaplan models, our data is split across different hierarchies. The full cost to serve here is split by different customers, as you can see by the hierarchy here, and by different regions. However, all the way down to standard margin is available at the SKU level as well. For example, here I have my SKU hierarchy rolling up into product types, but the hierarchies are defined by you, as is the level of detail that you want to go down to. The hierarchies in Anaplan automatically aggregate, so I can easily switch and see total products across all my regions for an individual customer and choose the level that I want to slice through.
One dashboard, one set of calculations, but the ability to slice through my hierarchies at any level. Moving back to the full cost to serve dashboard, we’ve aggregated the data to just be at the customer and region level, and it’s this level that we now apply our customer service costs, our distribution costs, such as freight, carrying costs, customs, and security, and then the other allocated costs, such as supply chain management and improvement costs. This gives us a total cost to serve per customer by period, by region, as well as the profitability of that customer.
As well as being split by the hierarchies, each of the lines you see here has a more detailed set of workings and data behind it, then feeds immediately through to this and the other outputs. Going back to the home page, we start to see how the model comes together. We take both operational and financial actual data from any source systems you might have, that could be directly or via a file, or if you have other Anaplan models already, we can feed that data through as well. We then use that data and the ability to project it forwards with any manual adjustments you want to make to build up the components that you see here across the bottom.
Starting on the demand side, Anaplan has inbuilt statistical forecasting with automatic ranking and best fit selection, and then the ability to add any risks, opportunities, or manual adjustments to get to a final volume by customer, SKU, and region, in this case by period, but we can go down to weeks, days, and even lower if required. Taking it a step further, adding in returns, rebates, allowances, and the price book gives us net sales by those same hierarchies.
Direct materials cost can be built up from the bill of materials with adjustments down to the material level, then applied based on volume. Driver-based calculations can be used to recalculate other direct costs, such as labour, based on any changes in demand. Freight costs are calculated down to ship-to location by incoterm. Then we have allocations where we can take any cost not initially assigned to customers and allocate them based on a relevant driver. For example, here we have costs such as customer service costs, procurement, insurance, indirect labour, and the ability to allocate them on financial measures, such as revenue, or statistical information, such as the volume, number of orders placed, number of sales visits, etc.
As well as the example outputs we’ve already seen, nowadays in Anaplan, we can choose to analyse and present it however we want to. For example, here I can see my cost to serve accounts split across a particular customer group, or if I choose all customers, I can see all my customers in the columns and start to analyse the differences. Taking it down to the level, if I want to compare two customers directly, I can use a dashboard like this one, either at the customer level or even up a channel. Or if I want to focus on core KPIs and see my customers ranked, we can spin the data to now see our customers ranked against those KPIs.
The granularity of the data and the ease of analysis Anaplan gives you allows you to gain actionable insight not just into a total cost to serve figure, but broken down into its components so you can see where action could and should be taken across your customers. As all dashboards are pulling from the same data, there’s no risk of manual error, and all this data is updated in real-time from the detailed workings that drive it.
Another dimension we have that runs through the entire model is the idea of diversions or scenarios. You can see here, it separates our actual data that we don’t yet have for December from our forecast we’ve been working on, and here, an identical copy as a scenario. It’s using this scenario plan, but I can start to ask questions of the model and get an instant answer. For example, here I can pop out my demand plan in units, see what happens if I type in an extra thousand units in December for Tesco’s in the UK. We can see that impact immediately on the units, but also where we have driver calculations, where we have our allocations, we can see the end result down at a total cost to serve level and therefore a profitability level as well. So, it’s very quick and easy to ask those questions and to create a new scenario in Anaplan.
So, hopefully, you’ve enjoyed this Bedford Consulting spotlight video on cost to serve. If you’re interested in a more detailed demonstration, please contact us, and we’ll be happy to help. [Music]
