Quick answer

What is a cost to serve analysis?

Cost to serve analysis traces every cost to the customer, channel or lane that caused it instead of spreading it as an overhead: order profile, drop size, delivery frequency, returns, credits and the cost of serving each one. You get a cost model by customer, channel or lane, the drivers ranked, and the commercial options: reprice, change the order profile, change the delivery pattern, or walk away. Fixed price $8,900 plus GST, or $249 including GST for the Cost to Serve Workbook if you would rather build it yourself.

Operations consultancy / Cost to serve analysis

Cost to serve analysis

Some customers are losing you money and the P and L cannot tell you which ones.

What does the work involve?

Every cost traced to the customer, channel or lane that caused it, not spread as an overhead.
Order profile, drop size, delivery frequency, returns, credits and the cost of serving each one.
The result tested against your own invoices so the model is defensible in a commercial conversation.

What do you get?

A cost model by customer, channel or lane.
What drives the cost, ranked.
The commercial options: reprice, change the order profile, change the delivery pattern, or walk away.

Who does it suit?

Businesses with a wide customer base and a flat price list, or anyone about to renegotiate with a major account.

Who is it not for?

A business with a handful of customers on the same terms, or a sales team wanting a price list written for them; this is a cost exercise, the pricing decision stays yours.

How long does it take?

Three to five weeks, set by how quickly order, delivery and labour data can be pulled; the proposal names the dates.

What do we need from you?

Missing some of this is normal and is not a reason to wait. Send what exists and we will tell you what the work can and cannot conclude before anyone commits.

Sales by customer for a full year.
Order and delivery history, including drop sizes and frequency.
Freight invoices and a loaded labour cost per hour.

What does it cost?

$8,900 plus GST as a fixed price review, or $249 including GST for the Cost to Serve Workbook if you would rather build it yourself.

How does 360 work?

A consultant delivers the work and is accountable for the content. Findings come from the data you supply and what we observe inside the agreed scope, and estimated benefits are opportunities to test rather than guaranteed savings. Where a recommendation could lead to 360 earning from supply, we say so in the report so you can compare it against the market. Full terms are on the purchase terms page.

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Worked example

What does cost to serve look like for a distributor?

Two customers, the same product, the same price list, the same gross margin on paper. One month of activity, with the costs that the P and L spreads as overhead traced back to the customer that caused them.

Per month	Customer A	Customer B	Where the cost comes from
Revenue	$40,000	$40,000	Same price list, same gross margin of 30%
Orders and drops	4 orders, 4 drops of 10 pallets	40 orders, 40 drops of 1 pallet	Order profile: the thing the price list ignores
Freight	$1,100	$4,400	Forty single pallet metro drops against four full runs
Picking and despatch	$400	$2,000	Forty orders picked, packed and documented against four
Returns and credits	$100	$900	Small orders are claimed and credited more often
Accounts and admin	$150	$750	Forty invoices, forty PODs, forty queries
Cost to serve	$1,750	$8,050	Traced, not allocated
Contribution after cost to serve	$10,250	$3,950	On $12,000 of gross margin each

The figures are illustrative and the shape is not: the same gross margin produces a contribution two and a half times higher on the customer who orders in full pallets once a week. Nothing in the P and L shows it, because freight, picking and admin are spread across every customer as a percentage of sales.

What the review does with it: rank every customer, channel and lane by contribution after cost to serve, then price the options. Customer B is not a bad customer; it is a mispriced one. A minimum order of two pallets, a delivery day rather than delivery on demand, or a small order charge that reflects the drop, each moves the number, and the review quantifies which one the customer will accept before anyone picks up the phone.

Questions

What data do you need?

Sales by customer, order and delivery history, freight invoices and a labour cost. If some of it is missing we tell you what the review can and cannot conclude before we start.

Can we do this ourselves?

Yes, and the workbook is on the tools page if you would rather. The review exists for operations where the data needs untangling first.

What comes out the other end?

A cost to serve by customer and by order type, with the drivers of that cost named: drop size, frequency, returns, freight and the labour the order consumes. The customers losing money are listed with the reason, and the pricing decision stays yours.

Will our sales team see it?

That is your call. The usual use is a renegotiation with a major account, where the person across the table has the figures before the meeting, and a review of minimum order values and delivery charges for the long tail.

Do you need our accountant involved?

Not for the analysis. Sales by customer for a year, the order and delivery history, the freight invoices and a loaded labour rate are enough, and the finance team is usually the quickest source of the first and last of those.

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