Cost-to-serve is the full cost of serving a customer once picking, packing, shipping, support and admin are counted, not just the cost of the goods. It is where a healthy P&L quietly hides loss-making relationships.
of customers, in a typical distributor, contribute negatively once true cost-to-serve is attributed.
two customers, same product, can sit on opposite sides of break-even after cost-to-serve.
the Profit Check tells you whether you have a cost-to-serve problem worth modelling.
Most operationally complex businesses run on a P&L that aggregates everything above the gross-margin line, then aggregates everything below it. It tells you whether last quarter was good. It doesn't tell you which customers were quietly subsidising others, or which orders cost more to fulfil than they earned.
A cost-to-serve model attributes operational cost down to the individual customer and order. The result is a ranked, defensible view of who actually contributes.
Whale curve. A few customers carry the profit; the tail erodes it. The peak is the profit you would have without the loss-makers.
Revenue streams, activities, cost pools, products and customers, in one structured view. Days of work, not months.
TDABC attaches a real cost to picking, packing, delivery, support and admin, based on the time each actually takes.
Every order's true cost-to-serve, rolled up to the customer, the product, the channel and the region.
Your finance team updates it. Cost-to-serve becomes a lens you apply continuously, not a report that ages on a shelf.
A New Zealand distributor found that 830 of 1,951 customers were contributing negatively once cost-to-serve was attributed, a combined 1.335M euros. Two years of deliberate decisions later, that loss-making contribution is roughly halved.
See also our pricing work and the margin cascade.
Take the free 5-minute Profit Check, or talk to a senior partner. Thirty minutes. Free. NDA on request.