Cost-to-serve is the operational cost of actually serving a customer once picking, delivery, waiting, returns and admin are counted. In logistics it is where route and account margin is decided, and a blended rate per kilo hides all of it. We attribute cost to the stop, the route and the account with TDABC, so you can see what each one really costs to serve.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
A rate per kilo, pallet or shipment treats cost as if it rose with what is carried. The real cost of a delivery sits elsewhere: the time to reach the stop, park, wait at the door, unload, hand over and record it, plus failed deliveries, returns and the admin behind a fragmented account. None of that tracks weight.
Blend it all into one rate and the dense, easy work sets the average. The thin, many-drop routes and fragmented accounts look fine while running below cost, and there is no way to tell which account is paying its way and which is being carried.
TRUE MARGIN BY ROUTE
Illustrative. Once cost lands on the stop rather than the kilo, dense and regional routes earn while thin rural and many-drop routes fall below zero.
Stop, park, wait, unload, hand over, record, return: the activities a route is really made of.
TDABC costs each activity per minute of vehicle, driver and depot capacity, with unused capacity visible, not smeared.
Each account carries the cost of how it buys: drop size, density, windows, returns and admin, not just its tonnage.
Accounts and routes sort by net contribution, so the loss-makers a rate hid become candidates to reprice or redesign.
| Account A | Account B | |
|---|---|---|
| Annual tonnage | 1,200 t | 1,200 t |
| Annual revenue | €310,000 | €310,000 |
| Drops / year | 240 | 2,050 |
| Average drop size | 5.0 t | 0.6 t |
| Cost to serve (TDABC) | €214,000 | €352,000 |
| Net per account | +€96,000 | −€42,000 |
Same tonnage, same revenue, same rate card. By cost to serve, one account funds the other, and only the stop-level view tells you which to grow, reprice or redesign.
CUMULATIVE PROFIT, ACCOUNTS RANKED
Illustrative. Rank accounts by true profit and the curve rises well above the reported total before a long tail of loss-making accounts drags it back.
With cost-to-serve attributed, account pricing, route design and tender bids rest on what serving each one actually costs. The network stops chasing tonnage that does not pay and stops subsidising fragmented accounts out of the dense routes that carry it.
Weight is easy to measure. The stop is where the money goes.
The Profit Check takes five minutes and no data upload. It points to where your blended rate is most likely hiding loss-making routes and accounts.