In today’s logistics landscape, shipping rates are only a fraction of the total costs within the supply chain. Many companies fall into the trap of focusing solely on reducing freight charges, without realizing that the Cost to Serve (CTS) is far more complex. Ignoring this broader perspective can significantly impact profitability and long-term sustainability.
Cost to Serve is a holistic approach to calculating all costs incurred in serving a customer—starting from procurement, warehousing, and distribution, to returns (reverse logistics) and after-sales services. It includes hidden costs that are often overlooked or not directly recorded, such as:
By calculating CTS, businesses can identify which customers or products are truly profitable—and which ones are not—even when they appear to generate revenue on the surface.
In the era of e-commerce and on-demand services, reverse logistics—the process of returning goods from customers back to the company—has become an essential part of the supply chain. This process involves transportation, quality inspection, repackaging, and even disposal costs. Without careful planning, returns can quietly eat into a company’s profit margins.
For example, if return logistics are not included in planning and pricing strategies, a company might set prices too low and unknowingly operate at a loss.
Adopting a total cost to serve approach means that every logistics decision—from mode of transport, distribution strategy, to technology implementation—should consider its overall impact on service costs.
A real-world example: Consolidating shipments from multiple customers into a single container may lower per-unit shipping costs. However, without proper coordination, it could lead to delays or misallocations that ultimately raise the total service cost.
As an integrated, tech-enabled logistics provider, PT SPIL understands that efficiency isn’t just about offering low shipping rates. SPIL offers both FCL (Full Container Load) and LCL (Less than Container Load) services tailored to meet diverse business needs—from large enterprises to SMEs.
Through LCL services, customers can share container space, significantly reducing logistics costs without having to wait for full volumes. Meanwhile, FCL shipments provide better control for large-volume cargo, minimizing damage or delivery errors that could lead to costly reverse logistics.
Combined with the mySPIL digital platform, customers can track shipments, schedule deliveries, and manage documentation independently—streamlining processes and cutting down administrative costs.
Accurately calculating Cost to Serve is essential to building a healthy and efficient supply chain. By understanding every cost component—including hidden costs and reverse logistics—companies can make smarter, more strategic decisions. With PT SPIL, efficiency becomes more than a promise—it’s a measurable, real-world solution.
