Two parameters cost every store, channel and SKU. No timesheets.
Retail generates more transactional data than almost any sector, yet most of it never becomes a true cost per store, channel or SKU. TDABC needs only two things: a capacity cost rate for each resource group (store labour, distribution centre, last-mile, checkout) and time equations that describe how each activity consumes time. From those, the real cost of receiving, replenishing, selling and taking back a product falls out automatically.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
TDABC for retail uses a capacity cost rate per resource group, store labour, distribution centre, last-mile, checkout, and time equations for receiving, picking, replenishment, checkout and returns. It assigns cost by actual time consumed rather than by sales-weighted averages, so each store, channel and SKU shows its real cost to serve and net margin without surveys or timesheets.
The cost driver is time and handling, not turnover.
Sales-weighted allocation punishes the wrong lines
Spreading store and DC overhead by revenue over-costs fast, simple SKUs and under-costs slow, high-touch ones. The cost driver is time and handling, not turnover.
Idle capacity is real cost
A distribution centre or checkout bank running below practical capacity carries unused-capacity cost that a fully-absorbed rate hides. Practical capacity sits at 80 to 85 percent of theoretical.
Channels consume time very differently
A store replenishment, a click-and-collect pick and a home-delivery pack are three different time equations. One blended rate buries the gap.
Returns and re-work are unmodelled
Inspection, repackaging and resale markdown are time and cost that never enter a gross-margin view.
THREE CHANNELS, THREE TIME EQUATIONS
Illustrative. Each channel is its own time equation, and unused practical capacity is reported, not buried in a fully-absorbed rate.
A rate per resource, a time per activity.
First the capacity cost rate, the cost of a resource group divided by its practical capacity so idle time does not hide in the rate. Then the time equations that drive each activity. Multiply each by its capacity cost rate, add product cost, and every store, channel and SKU carries its true cost.
Capacity cost rate = cost of the resource group per period
/ practical capacity (minutes available)
Receiving time = 4 min per pallet + 0.3 min per case
Replenishment = 0.5 min per facing + 0.1 min per unit
Checkout time = 0.4 min per basket + 0.05 min per line item
Pick (online) = 1.2 min per order + 0.25 min per line
Return handling = 6 min per returned unit (inspect + restock + resale prep)
Illustrative time equations. Unused practical capacity is reported separately, not absorbed into the unit rate.
In the gap between how a SKU sells and how it handles.
As an illustrative pattern, a fashion chain found that low-price, high-volume basics looked thin on gross margin but were genuinely profitable because they handled and replenished cheaply, while a band of premium, fast-changing lines with high return and markdown rates destroyed net margin despite a flattering gross figure. Only time equations made that visible, because the cost was in the handling, not the price.
For the full method and how it differs from traditional ABC, see →
Frequently asked questions
- What is TDABC for retail?
- Time-driven activity-based costing applied to stores and channels: a capacity cost rate per resource group plus time equations for receiving, replenishment, checkout, picking and returns, giving cost per store, channel and SKU.
- How is TDABC different from activity-based costing in retail?
- Traditional ABC needs activity surveys and many cost-driver allocations. TDABC needs only a capacity rate and time equations, so it scales across thousands of SKUs and updates as volumes change.
- How do you cost a store with TDABC?
- Build the capacity cost rate for store labour and space, write time equations for receiving, replenishment and checkout, then assign by actual time, reporting unused capacity separately.
- Does TDABC work across online and store channels?
- Yes. Each channel gets its own time equations (store replenishment, click-and-collect pick, home-delivery pack), so blended-rate distortion disappears.
Turn your transaction data into a true cost per store.
The Profit Check needs no data upload. It shows where a TDABC model would change the numbers behind your stores, channels and SKUs.
- Duration
- 12 to 15 minutes
- You receive
- Score, 7 dimensions, sector benchmark
- Price
- Free, no email needed
Proof
A retail chain. The margin was on the shelf label. The cost was everywhere else.
Read the case study →Who you would be talking to
Miguel Guimarães, Founding Partner
Cost and profitability practitioner for 25+ years. Presented the Damco cost-to-serve case at Managing for Profit (Amsterdam RAI, December 2009), on the same programme as Robert S. Kaplan.
Call +351 910 313 731
Workshops20-21 Oct · Online, ZoomReserve a seat
Reviewed by
Miguel Guimarães
Founding Partner, Cost and Profitability Consulting
More than 150 Time-Driven ABC engagements across 11 sectors since 2010, working within the Kaplan and Anderson framework.
About the author →Published
Done. Advertising and measurement is now declined on this browser, so the LinkedIn Insight Tag does not load and nothing about your visit is shared with LinkedIn. You can turn it back on here at any time.
We are asking again. Your last answer is more than 12 months old, so it has been cleared. Nothing is switched on until you answer.
This notice has changed. Your previous answer was given to different wording, so it has been cleared and we are asking again. Nothing is switched on until you answer.
Session recording. Microsoft Clarity records how this page is used - mouse movement, clicks and scrolling - so we can improve it. Form fields are always hidden from the recording.
Advertising and measurement. The LinkedIn Insight Tag tells LinkedIn that you visited this site, so we can measure our advertising and reach people like you. This shares data with LinkedIn, a third party outside this site.
GPC. Your browser sends a Global Privacy Control signal, so the advertising purpose is declined automatically and we do not ask you about it.
- 1Time-driven activity-based costing: ABC made simple and scalable
- 2Cost-to-Serve Analysis
- 3The Whale Curve
- 4TDABC vs ABC
- 5Make-or-Buy and Relevant Costs
- 6Cost-Volume-Profit (CVP) and Break-Even Analysis
- 7Customer Profitability Analysis
- 8Methods & Frameworks: how we cost, defensibly
- 9TDABC for Financial Services
- 10How to calculate cost to serve, step by step