This quarter’s Supply Chain Quarterly features an article by Dr. Alan Kosansky and Ted Schaefer entitled A Fresh Approach to Improving Total Delivered Cost.
“Most companies calculate total delivered cost (TDC) based on inaccurate and outdated assumptions. Using optimization technology to more accurately forecast TDC by product and customer will help them to improve both their supply chain planning decisions and their costs.
Profitability is the engine that drives all successful businesses. To manage profitability, a company must understand and have good control of both its revenues and its costs.
For a long time, companies have had a good understanding of the revenue side of the business at a detailed customer and product level. It is only in recent years, however, that they have begun to understand their costs at the same detailed level by customer and product. To gain that insight, many companies use total delivered cost (TDC)—the complete cost of sourcing, producing, and delivering products to customers. TDC, in turn, has become a critical metric in guiding supply chain planning decisions.”