Cost to serve when someone else runs the operation

The invoice is a summary, not the analysis

Charges usually arrive aggregated by activity for a period: so many orders assembled, so many pallets stored, so many consignments despatched. Attribution needs the underlying transactions with an order reference attached, which providers can normally supply from the same system that produced the bill. Ask for it as a standing report during contracting rather than as a favour afterwards, because retrofitting the request tends to be treated as a change with a price.

Activity data is the bridge between invoice and customer

Once each chargeable event carries an order reference, the client's own order records supply the customer, channel, product and delivery location. Joining the two produces cost per order, per customer and per product without any need for the provider to understand the commercial structure. Rules are still needed for the elements that do not attach to an order, particularly storage, which is better allocated by the space a product actually occupies over time than by a share of revenue.

What the answer usually shows

The recurring findings are consistent across sectors, if not in magnitude: small orders cost close to what large ones cost, so their logistics burden falls disproportionately on the value of the sale; a long tail of slow-moving lines consumes storage out of proportion to what it earns; a minority of delivery locations generate most of the failed deliveries; and returns concentrate on particular products or channels. None of these is visible while the cost sits in one overhead line.

Acting on it without breaking the agreement

Responses range from commercial levers such as minimum order values, order consolidation incentives and delivery day rationalisation, to operational ones such as slotting changes and packaging revision. Some of these alter the assumptions the provider priced against, so they belong in a joint conversation rather than as a unilateral instruction. Providers generally welcome the analysis, because a client that understands where cost arises makes better-informed requests than one that only sees a total.

Frequently asked questions

Does this analysis need an activity-based charging structure?

It is easier with one, because the charges already describe activities. Under an open-book or fixed-fee arrangement, the same result comes from the provider's activity records rather than its billing, which means agreeing access to operational data instead of relying on the invoice.

How should storage cost be allocated to products?

By occupancy over time, using the positions or area each product held across the period. Allocating storage by sales value or unit volume flatters slow-moving stock, which is exactly the cost the analysis exists to expose.

Who should own the analysis, the client or the provider?

The client, because the conclusions are commercial. Providers can supply data, and often help interpret it, but decisions about which customers, orders or products to reshape sit with the party that owns the pricing and the range.