A €1.335M cost-to-serve problem, made visible, then halved.
A mid-sized industrial distributor in New Zealand had a P&L that was healthy in the aggregate and silent on the detail. We built a TDABC operating model that showed the detail. The client did the hard part: it acted.
The challenge
The client is a 115-person distributor serving thousands of businesses across New Zealand. It runs the kind of model where profitability lives in the detail: a wide product range, a long tail of customers, and a cost-to-serve that swings enormously with order size, product mix and how each customer trades.
Like most distributors, its accounts were healthy in aggregate but quiet on the detail. The business couldn't show which customers and products were genuinely contributing once the full cost of serving them was counted: the picking, the packing, the shipping, the support. That blind spot isn't unique to one company. It sits in almost every distribution business. The difference here is that this client decided to look.
The approach
This was a consulting engagement, not a software rollout. We worked alongside the client's team and built four things, in sequence.
A structured operating model of the business.
Revenue streams, activities, cost pools, products and customers, mapped into one consistent, explainable view of where every dollar of cost actually went.
The data the client already had.
Financials from the accounting system, plus the operational and transactional data describing how customers really traded. No new IT project. No replatforming.
Cost attributed to where it was consumed.
TDABC took thousands of transactions and turned them into a clear cost-to-serve picture, down to the individual customer and product. The first model showed that 830 of the client's 1,951 customers were contributing negatively once true costs were attributed: a combined €1.335M.
A model the client owns and runs.
This is the part that makes it consulting, not a report. We handed over a living model, not a slide deck. The finance team updates it, and the insight becomes an ongoing programme rather than a single answer.
What the client did with it
The number on its own changes nothing. What mattered was the sequence of deliberate decisions it unlocked.
Re-priced where the economics didn't work. Targeted price changes on loss-making product-and-customer combinations, grounded in actual cost-to-serve rather than guesswork.
Leaned into genuine strengths. Refocused on products where the client had real buying power, and where larger volumes naturally covered the cost to serve.
Matched effort to value. Prioritised the customer industries where its strengths translate into a sustainable margin, and stepped back from trading that only held volume.
Encouraged trading patterns that help both sides. Worked with customers to consolidate many small orders into fewer larger ones, cutting the cost of picking, packing and shipping, and simplifying receipting for the customer.
Became the consolidated vendor. Won business by replacing several fragmented suppliers with one scaled, efficient relationship.
The outcome
The loss-making cohort has roughly halved. The €1.335M of negative contribution identified at the outset is now around €665K, and the number of negatively-contributing customers has fallen from 830 to 295, with most of those now close to break-even.
Crucially, this was not done by walking away from customers. Every customer still helps cover the fixed cost base, so the goal was to turn relationships around, not to pretend the cost disappears when a customer does. The major loss-makers were either turned around or, where there was no viable path, wound down deliberately. The remaining gap is understood, quantified and managed. That is a fundamentally different position from not knowing it existed.
The model didn't just produce an answer. It gave the business a permanent way of seeing itself.
Cost-to-serve stopped being an annual mystery and became a lens, applied to pricing, product focus and customer strategy on an ongoing basis.
It gave us a view of our business we'd never had: which customers and products were actually contributing, once you accounted for everything it took to serve them. That visibility changed how we price, what we focus on, and how we work with customers. It's become part of how we run the business.
THE TOOL BEHIND THE MODEL
The operating model the client runs today lives in CostCtrl, the platform we build these models on. Same method, made repeatable.
THE METHOD
Cost-to-serve is the lens that made all of this possible. See how we measure it, customer by customer.
YOUR TURN
What's hiding in your customer book?
The Profit Check takes five minutes and tells you whether you have a cost-to-serve problem worth modelling. No deck. No pitch.