Cost-to-serve (CTS) is the total cost associated with delivering a product or service to a customer—including order processing, fulfillment, transportation, customer service, and returns.
It’s often an invisible KPI. Many manufacturers and distributors track gross margin by customer or product but miss the nuanced costs involved in servicing each order.
And that’s a mistake—because the difference between profitable and unprofitable customers often lies in the details of how much it costs to serve them.
In an era of tight margins, rising labor costs, and growing customer expectations, knowing your CTS is more important than ever.
Here’s why:
You can’t improve what you can’t see
Not all revenue is good revenue
High CTS erodes profitability, even on large accounts
It helps you price more strategically
It enables segmentation and service-level alignment
And yet, many B2B organizations have never calculated it—or if they have, they haven’t connected it to operations decisions.
CTS isn’t just about shipping costs or raw materials. It includes:
Time spent on manual order entry
Exception handling and order corrections
Order-related customer service tickets
Returns and rework
Freight and handling
System maintenance for custom customer workflows
Labor tied to fulfillment and logistics
In other words, anything you spend to deliver on the promise of the sale.
Let’s say you have two customers:
Customer A:
Sends standardized POs weekly
Has accurate order data
Rarely requires corrections
Uses preferred shipping
Customer B:
Sends handwritten POs via email
Requires constant clarification
Has frequent returns due to incorrect SKUs
Insists on custom delivery schedules
On paper, both may generate the same revenue. But one costs 2–3x more to serve.
If you’re not measuring that, you could be subsidizing low-margin, high-maintenance accounts without realizing it.
Manual order processing is one of the most overlooked drivers of high CTS. Why?
Data entry is time-consuming and labor-intensive
Errors require expensive rework or returns
Exceptions slow down the entire system
CSRs are forced into reactive firefighting roles
Orders can’t be processed at scale without hiring more people
Multiply that across hundreds or thousands of orders per month, and it adds up fast.
Here’s how automation helps lower cost-to-serve without sacrificing service:
With Conexiom, orders move from inbox to ERP with no manual intervention. Less labor, fewer bottlenecks.
Data is validated automatically, reducing the need for customer corrections, returns, and credits.
Only orders with issues are routed to your team—keeping the majority of workflows clean and fast.
Automation lets you handle more orders without increasing headcount or overtime.
You gain data on process performance, allowing you to refine and optimize continuously.
Lowering CTS isn’t just about cutting costs—it enables smarter decisions across the organization:
Pricing: Adjust pricing for high-maintenance accounts
Account Management: Identify profitable vs. unprofitable segments
Operations: Reallocate staff from manual entry to value-added roles
CX: Improve customer satisfaction by reducing fulfillment issues
Finance: Tie CTS data to margin models for better P&L visibility
By making CTS visible, you can manage it proactively—not just reactively.
You don’t need a full-scale analytics platform to begin.
Start by calculating:
Total monthly labor hours spent on order processing
Number of orders processed manually
Average time spent per exception or error
Returns or credits tied to order mistakes
Time spent on post-sale customer support per account
From there, divide total costs by the number of orders, and segment by customer or region.
The goal isn’t perfect precision—it’s directional insight.
One electronics distributor used Conexiom to reduce their order processing time by 80% and eliminate nearly 95% of manual touches. That led to:
2 fewer FTEs needed per region
A 60% reduction in order-related support tickets
Higher gross margin per account—without raising prices
Their insight? It wasn’t pricing that was hurting margin—it was how much it cost to deliver the order.
Cost-to-serve doesn’t show up on invoices. But it shows up everywhere else—in customer complaints, in support tickets, in missed deadlines, in operational fatigue.
If you want to grow profitably, you can’t just focus on revenue. You need to focus on how efficiently you fulfill that revenue.
With order automation, you lower the hidden costs that drag down your margins—while building a stronger, more resilient operation.
CTA:
Want to know what your cost-to-serve actually looks like—and how to improve it? Talk to a Conexiom expert and get a free CTS audit tailored to your business.