CPG manufacturers have made great progress in terms of productivity gains and cost reductions across their supply lines. However retailers such as HEB, Kroger and Walmart, are putting unprecedented pressures on trading partners to remove even more cost from their systems, in order to make the shelf more productive. But trying to remove costs from something you cannot measure is an exercise in futility. Even a trail-and-error approach requires some level of measurement. Otherwise, “error” is inseparable from “trial.” Perhaps Galileo, the famed Italian mathematician and astronomer, said it best:

“Measure what is measurable and make measurable which is not so.”

Galileo’s approach, defined more than four centuries ago, is pivotal for CPG manufacturers seeking to capture sustainable value from their supply chains. Specifically, manufacturers need visibility into retailer cost-to-serve in order to build out complete supply chain models – Models that simultaneously consider omni-channel, as well as the activity-based costs connected to their supply paths, handling options, and merchandising tactics.

Omni-Channel ABC Visibility

ABCs for Omni-Channel

As illustrated above, omni-channel ABC connects channels, distribution, and delivery with retail outlets.  By bringing visibility into retailer cost-to-serve, manufacturers are able to:

  • Understand how retailer costs vary by channel
  • Model competitors, categories and SKUs to evaluate cost structures
  • Create cost models to understand how packaging, cube, and value-added services impact retailer costs
  • Improve menu pricing and bracket programs
  • Increase sales by helping retailers understand the benefits of Shippers and DRPs.
Retailer ABC Models v2

Integrating Manufacturer and Retailer Activity Based Costs

Willard Bishop is helping manufacturers improve supply chain performance by creating ABC models that combine data from the manufacturers’ operations (plants and distribution centers) with retailer warehouse and store-level data.

Willard Bishop began delivering ABC models and labor cost standards to the grocery industry in 1981. Since then the company has expanded its models to include multi-channel analytics. Today, Willard Bishop’s ABC models include:

  • Total costs for warehouses and stores – From warehouse receiving to store checkout
  • Alternate supply paths including warehouse, cross-docking, DSD, and parcel
  • All temperature states (dry/refrigerated/frozen)
  • Multiple unit loads including pallet, shipper, case, sleeve, each, cube size, etc.
  • Different handling option such as backhaul, rail, pallet, floor stacks, EFT, EDI, SBT, etc.
  • Assorted product characteristics, including cube, turns, days-of-supply, tray, etc.

CPG manufacturers can now use these integrated ABC models to gain visibility and insight into their trading partners’ activities. By doing so, they will create new products, programs, and processes that simultaneously increase sales and profits, while improving productivity.

To learn more about Willard Bishop’s omni-channel ABC models and capabilities, please contact Paul Weitzel at 847-756-3717 or at paul.weitzel@willardbishop.com.

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   About the Author:
Paul Weitzel Headshot with Title
 
Paul.Weitzel@WillardBishop.com | 847.756.3717
Paul leads Willard Bishop's efforts in providing cost and profit management solutions to the grocery, convenience, mass, drug and food-service trade channels.
Paul’s specific areas of expertise include cost modeling, activity-based costing, cost-to-serve pricing, account and customer profitability, joint business planning and joint value creation, developing aisle optimization strategies, developing channel growth strategies and helping manufacturers achieve speed-to-shelf.
Paul has also authored several key industry publications, including two Best Practices Reports on direct store delivery (DSD) and Getting it Right at Retail. Paul holds an M.B.A from DePaul University.