Cost-to-serve

Cost-to-serve describes the costs required to serve a customer, order, product group, or sales channel. It goes beyond the purchase price or transport invoice. Order administration, warehouse handling, packaging, returns processing, and special customer agreements can also represent a significant part of the costs.

In practice, you link activities to appropriate cost drivers, such as order lines, picks, shipments, or returns. A customer with many small urgent orders can therefore require more effort than a customer with the same turnover and regular full deliveries. Make it clear which costs are directly allocated and which are distributed based on assumptions, so that the result does not appear more precise than the data allows.

Insight into cost-to-serve makes it visible where turnover contributes insufficiently to profitability. This supports discussions about minimum order sizes, delivery frequency, pricing agreements, and more efficient processes. The goal is not automatically less service, but a conscious balance between customer value and the costs of delivering that service.