Matthew Owen
Dec 03, 2025
Cost-to-Serve in an inflationary market: The skills supply chains need now
As inflation continues to ripple through every layer of UK supply chains, the ability to pinpoint true profitability has shifted from a “nice to have” to an essential strategic discipline. According to recent industry outlooks, organisations are under increasing pressure to understand margins not just at a customer level, but across individual routes, channels and fulfilment models.
Cost-to-serve (CTS) modelling sits at the centre of this challenge, yet many businesses still lack the tools, data maturity and human capability to use it effectively.
Why has cost-to-serve become so important in an inflationary market?
Logistics and FMCG operations are dealing with simultaneous cost surges: labour, energy, transport, packaging and raw materials. At the same time, customers - from supermarkets to distributors to major manufacturers - are negotiating harder, adjusting ordering patterns and demanding more flexible service levels.
This volatility exposes a structural issue: traditional margin reporting often masks the true cost of serving different customers. Two accounts with identical revenue profiles can deliver very different profitability outcomes once the cost of delivery frequency, split loads, specific compliance requirements or returns volumes are factored in.
That’s why CTS has rocketed up the agenda. Leaders now want clarity on:
- Route-level profitability: How rising fuel, driver hours, congestion and delivery constraints change the economics of every mile.
- Customer-level cost variance: Which accounts erode margin through unpredictable ordering, complex requirements or high service demands.
- Network-level optimisation: How warehouse footprints, carrier strategies and inventory positioning should adapt to inflation-driven cost structures.
Insights like these aren’t optional anymore, they underpin pricing conversations, contract renegotiations, service-level redesign and long-term supply chain strategy.
Inflation has changed the skills profile required
What’s driving the need for clearer customer- and route-level profitability? The technology supporting CTS models is improving, but businesses increasingly recognise that tools alone won’t fix the visibility gap. What’s changing fastest is the human capability required to interpret and act on the data.
The most in-demand capabilities now include:
1. Analysts with genuine financial fluency - Organisations need people who can move comfortably between operational data and financial interpretation: understanding how cost drivers behave under inflationary pressure and how service decisions flow through to P&L impact.
2. Commercially minded supply chain managers - Professionals who can articulate CTS outputs to commercial teams and customers are becoming invaluable. They bridge the gap between operational constraints and commercial realities, enabling fact-based negotiation and collaboration.
3. Data translators with strong curiosity - CTS modelling often surfaces unexpected cost behaviour: promotional uplift that disrupts replenishment plans, service promises that silently drain capacity, or routes that have become unviable due to inflation-linked changes in demand. Businesses need people who can interrogate anomalies, spot patterns and simply ask smarter questions.
4. Scenario modellers and problem-solvers - In an environment where costs shift quickly, companies benefit from individuals who can build and test “what if” scenarios - changing delivery frequency, order thresholds, warehouse locations or transport modes - to recommend pragmatic action.
5. Risk-aware decision makers - Recent supply chain risk analyses highlight continued exposure to geopolitical tension, transport disruption and extreme weather. CTS is no longer just about historic cost; it's about resilience. Teams need the mindset to view cost modelling through a risk lens, not just an efficiency lens.
What benefits do organisations see when they invest in cost-to-serve capability?
Businesses that invest in CTS capability are seeing tangible advantages:
- More confident pricing and contract decisions
- Reduced margin leakage across routes and accounts
- Stronger relationships with customers through data clarity
- Optimised transport and warehouse utilisation
- Better alignment between commercial and operational functions
Above all, CTS creates a common language for discussing cost and value at a time when inflation has blurred the lines between the two.
Building the future workforce
As demand grows for financially aware analysts, commercially capable supply chain managers and data-savvy operators, talent strategies need to evolve. Companies are rethinking role definitions, upskilling existing teams, and bringing in specialists who can accelerate capability.
The organisations that win will be those that blend advanced modelling tools with the right human judgement namely people who can interpret complexity, challenge assumptions and drive profitable decisions across the network.
