The “cost to serve” blind spot has cost more supply chains than it should.
You have a customer you have served for eight years. They order consistently, pay on time, and never complain. You value them. Your sales team protects the relationship. When pricing pressure comes up internally, someone always says “we cannot afford to lose them.”
Nobody has ever modelled what it actually costs to serve them.
I am not talking about product margin here. We have that number.
The “cost to serve” number is different:
- The delivery frequency
- The order pattern
- The packaging requirements
- The returns rate
- The invoice queries
- The exceptions your planning team builds into the schedule because of how they order
When that number finally appears, the reaction is rarely about the number itself. It is the question that follows:
“Why did we not know about this?”
Because every decision made around that relationship — pricing concessions, service priority, capacity allocation — was made without it.
This is not a rare situation.
Most supply chains have a version of this customer. Some have ten of them.
The margin report shows green. Decisions feel reasonable until they do not. The “cost to serve” is invisible.
The customers who cost the most to serve are rarely the ones anyone suspects.
They are the ones nobody has looked at.
When did you last run a cost to serve analysis that changed how you thought about a customer you assumed was straightforward?