The real cost to serve: why your margin isn't where you think
Averaging logistics cost per unit hides the customers and products that destroy profitability. How to calculate cost-to-serve and act on it.
Many companies know their total logistics cost, but very few know how much it costs them to serve each customer. That gap is where margin hides — or leaks away.
The average lies
When logistics cost is spread evenly across all units, efficient customers subsidize expensive ones. The result: orders that look profitable but actually subtract.
Cost to serve varies by customer, channel and geography.
What cost-to-serve includes
- Primary and last-mile transport
- Storage and handling by order profile
- Cost of returns and rework
- Associated administrative and financial time
From spreadsheet to decision
Calculating cost-to-serve isn't an accounting exercise: it's a commercial tool. It lets you renegotiate terms, adjust order minimums and redesign the channel mix with data.
Three high-impact moves
- Identify the 10% of customers that concentrate the losses
- Define differentiated service rules per segment
- Carry the real cost into commercial policy
Margin is a decision
When logistics is measured per customer and per product, it stops being an opaque cost center and becomes a lever for profitability. Margin doesn't appear: it's designed.