A good-looking client that is not
At the board meeting the biggest client by revenue is the one everybody points to. But the operations manager has a nagging feeling. Their orders are multi-line, their products are awkward, they send returns in bulk after every sale, and the account manager spends half a day a week on their emails. Meanwhile a smaller client with simple single-item orders never causes a problem.
Nobody can prove which one earns more, because nobody has put labour, space and carrier costs against each client in the same place.
Why cost per client stays hidden
Costs in a warehouse are shared. Pickers work for several clients in a shift, racking holds everybody's stock, the carrier bills one account for all of it. Allocating them needs activity data, and the activity data is in the WMS while the costs are in payroll, the agency invoices and the ledger.
| Cost | Where it lives | How it can be allocated |
|---|---|---|
| Picking and packing labour | Rotas, clocking, agency invoices | Pick and pack activity per client from the WMS |
| Goods in and returns labour | Same as above | Receipt and return lines per client |
| Space | Rent, rates, racking depreciation | Location occupancy per client |
| Carrier cost | Carrier invoices | Shipment matching by tracking number |
| Packaging and consumables | Purchase ledger | Box types and inserts per order |
| Account management | Salaries | Time or contact volume, if recorded |
Without this, pricing reviews rely on revenue alone, and clients with complicated work look as good as those with simple work.
What not knowing costs
Unprofitable clients get renewed on the same terms, sometimes with discounts. Profitable ones may be lost on price because you could not see the room you had. Operational decisions, such as who gets the prime pick locations or the best staff, are made without knowing which accounts can bear it.
It also affects which new clients you chase. If you cannot tell what kind of work pays, sales will keep bringing in more of whatever is easiest to sell.
The cost-to-serve model we build
- Activity data from your WMS each month: orders, lines, units, receipts, returns, value-added jobs and occupancy per client.
- Cost data from your accounts package, such as Xero, QuickBooks or Sage, plus payroll totals, agency invoices and carrier invoice lines.
- Allocation rules your finance team agrees: labour hours by activity counts weighted by standard times, space by occupancy, carriers by matched shipments.
- A monthly profit and loss per client with revenue from your billing, the allocated costs and the margin, with the method visible for each line.
- Trends per client over time, and a comparison of actual activity with what was assumed when the client was quoted.
- A simple scenario tool for price reviews: what happens to margin if a rate changes or the client's order shape shifts.
Allocation is always an approximation. The value is in using the same method every month, so changes are real, and in being able to explain the method to anyone who questions it.
What the management team gets
A shared, monthly view of which clients pay their way and why. Price reviews start with the client's own activity and cost. Account managers know where to spend their time. And sales can be pointed at the kind of client that suits your operation.
Signs you need a cost-to-serve view
- Clients are ranked by revenue, not margin.
- Price reviews use the original quote assumptions.
- Labour and carrier costs are known in total but not per client.
- Someone suspects a big client loses money, but nobody can show it.
- You are not sure what kind of new client to look for.