Cost-to-Serve Has a Logistics Problem - And It’s Not What You Think

Because margin isn’t lost in finance reports. It’s lost when logistics isn’t involved soon enough.

You can tell a lot about how a company sees logistics by who owns cost-to-serve.If it's buried in a finance dashboard and reviewed once a quarter, logistics is probably still seen as a back-office function.If it’s actively shaped by transport data, procurement insights, and operational reality - then you’re dealing with a business that understands where margin is actually made or lost.

The problem? Too many companies fall into the first category. And they don’t even realise it.

The illusion of financial control

Let’s call it what it is: cost-to-serve, in most companies, is a finance-led initiative retrofitted onto operations. It’s calculated based on averages, general allocations, and backward-looking reports. And yes, it’s useful - to an extent. But it tells you where you bled margin, not how to stop it.

What’s missing is the operational layer:

• Why did this customer require expedited freight three times last month?

• Why are we still using premium freight for low-margin orders?

• Why are we accepting delivery windows that force partial loads?

No spreadsheet will give you these answers. Only logistics can.

If logistics isn’t in the cost-to-serve conversation, you’re optimising in reverse

The logistics team is often handed a cost-to-serve report and told to “do something about it.” But by then, the choices have already been made. Sales has promised unrealistic SLAs. Procurement signed contracts based on volume, not frequency. And transport is left holding the operational chaos.

We keep treating logistics as a cost to reduce, not a capability to shape.

That’s the blind spot.

What logistics actually needs: context, visibility, and authority

The way out isn’t more reports. It’s building a logistics layer into your cost-to-serve model that reflects how transport decisions are made in real life.

That means:

• Real-time visibility over what was promised vs. what was delivered

• The ability to connect freight cost spikes to commercial decisions

• A feedback loop between rate cards, spot usage, and service levels

• Context on where inefficiencies actually happen - not just where they’re paid

When logistics leads, cost-to-serve becomes a performance tool

The companies getting this right aren’t waiting for finance to raise a flag. They’re putting logistics at the table - not just to report cost, but to shape it.

And they’re doing it with real-time KPIs that connect the dots:

• Carrier performance vs. contracted SLA

• Spot vs. contract freight deviation

• Freight cost per order line

• CO₂ per shipment vs. delivery mode

• Frequency of urgent vs. planned transport

Because once logistics stops being treated as a reporting endpoint and starts acting as an input into pricing, service design, and planning - that’s when cost-to-serve stops being a metric… and becomes a competitive edge.

If you're serious about profitability, don’t hand logistics a cost-to-serve report after the quarter ends. Give it the tools, data and authority to influence it before it happens.

That’s not just control. That’s leverage.