The Cost-to-Serve Index · 2026

How much profit hides inside cost-to-serve?

An annual proprietary barometer built from the TDABC models we deliver. Composite, anonymised and aggregated with client consent.

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In the distribution and logistics models we build, roughly a third of customers contribute negatively to profit once the true cost of serving them is attributed. The business is still profitable overall. It just does not know where.

A composite read across engagements, anonymised and aggregated with client consent. Figures are illustrative of the pattern, not a statistical survey. The 2026 edition will firm up the sample.

The shape behind the Index. Cumulative profit peaks above 100 percent on the best customers, then the loss-making tail pulls it back. The peak is the recoverable margin.
01What the models keep showing
20-40%

of customers contribute negatively after cost-to-serve, concentrated in the long tail of small, frequent, complex orders.

>100%

cumulative profit peaks well above the reported total before the loss-making tail drags it back. The gap is recoverable margin.

Rarely cut

the answer is almost never to drop customers. It is to re-price, consolidate orders, and match effort to value.

Method. The Index is built from the TDABC operating models we deliver, attributing operational cost down to individual customers and orders. Each contributing engagement is anonymised; only aggregate patterns appear here. We publish it once a year and date every figure.
02From pattern to result

One distributor turned this pattern into a multi-year turnaround: 1.335 million euros of negative contribution, roughly halved.

The difference between knowing a loss-making tail exists and knowing exactly who is in it.

03Frequently asked questions

About the Index.

What is the Cost-to-Serve Index?
It is an annual read on how much profit hides inside cost-to-serve. It is built from the TDABC operating models we deliver, attributing operational cost down to individual customers and orders. We publish it once a year and date every figure.
How many customers contribute negatively?
In the distribution and logistics models we build, roughly a third of customers contribute negatively to profit once the true cost of serving them is attributed. The business is still profitable overall. It just does not know where. Typically between 20 and 40 percent of customers, concentrated in the long tail of small, frequent, complex orders.
Is the answer to drop loss-making customers?
Almost never. The answer is to re-price, consolidate orders, and match effort to value. Cumulative profit usually peaks well above the reported total before the loss-making tail drags it back. That gap is recoverable margin.
The Cost-to-Serve Index
Stacked cost bars for three customers against their revenue. The third looks good on product cost alone but its service costs exceed revenue. Illustrative data. product cost picking, delivery, support returns and rework revenue Customer A Customer B Customer C costs above revenue illustrative
Product cost is only the beginning: service behaviour decides the real margin.

See exactly where you stand.

Take the free 8-minute Index and get your maturity score on the spot, plus the one reading of five to look at first. Peer comparisons by industry, size and role arrive with the 2026 Index, once the sample can carry them.

Tier1
Blind
Profit is a company-level number. The cost of serving an individual customer or order is invisible.
Tier2
Aware
You suspect a share of your customers cost more than they pay, but have no method to prove it. The most common place to be.
Tier3
Measured
You measure real cost-to-serve with activity- or time-driven costing. You can name the profitable and the unprofitable.
Tier4
Steering
Cost-to-serve changes what you do: prices, minimum orders, service tiers, which accounts you keep. The frontier is making it continuous.
Tier5
Autonomous
Always-on profitability intelligence, embedded in operations and accelerated by AI. Rare air.
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Miguel Guimarães

Reviewed by

Miguel Guimarães

Founding Partner, Cost and Profitability Consulting

More than 150 Time-Driven ABC engagements across 11 sectors since 2010, working within the Kaplan and Anderson framework.

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