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Driving Better Decisions in a Multichannel Setup

The challenge: Gaining full insight into end-to-end costs in a multichannel setup

E-commerce is growing exponentially. Consumers are no longer satisfied with conventional shopping experiences. Coming from a traditional setup, where consumers go to physical stores and take their furniture home, a multinational home furniture retailer was in the middle of transitioning to a multichannel setup. The company needed to have full insight into the end-to-end costs and the profitability per order fulfillment. This insight is crucial to take the right decisions on pricing, their network set-up and the preferred and most efficient order and delivery offers. Short delivery times and competitive pricing are key in their industry.

How we created value: Full insight into factors that drive costs and profitability

To create insight in what is driving costs, we created a cost-to-serve model to provide a profit and loss breakdown based on all identified order fulfillments. To ensure the cost-to-serve model is providing fully accurate output, data sources were combined to obtain the complete cost and sales picture. To ease interpretation and analysis of the output, the retailer can see profit and loss by product group, and order fulfillment via reports in QlikView. To validate and optimize the retailer’s decision-making, an excel-based what-if analysis tool, powered by the model’s output, was created to test different scenarios, business cases and simulate the effect of company decisions.

Better results: Fully-informed decisions leading to increased efficiency and cost savings

The cost-to-serve model shows the retailer’s profit and loss in a new way, fully incorporating the multichannel setup they have adopted. By being able to split up profit and loss by product group and order fulfillment, the retailer is now able to quickly find opportunities to optimize. This helps them reduce costs significantly and scale channels with ease, leading to increased efficiency. Using the what-if scenario tool, the retailer is also able to make better and fully-informed decisions in an ever-changing multichannel world.

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