A per-kilo rate doesn't see the stop.
Most logistics businesses price and report on a blended rate per kilo, pallet or shipment. But cost is driven by the stop, not the weight: the drop density of a route, the waiting time at a door, the failed deliveries, the returns. We attribute cost to the work each account and route actually causes with TDABC, so a thin, many-drop round stops hiding inside the average set by dense urban volume.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
The average is set by the easy work.
A rate per kilo or per shipment assumes cost rises with what is being carried. On the road it does not. A driver spends the day stopping, parking, waiting at doors, finding the contact, handling returns and recording proof of delivery. A dense urban route does forty drops in the time a thin rural one does twelve, and the admin behind a fragmented account dwarfs the admin behind a consolidated one.
Blend all of that into one rate and the easy, high-density work sets the average. The hard routes and fragmented accounts look fine on paper while they quietly run below cost, and the commercial team keeps winning more of exactly the business that loses money.
TRUE MARGIN BY ROUTE
Illustrative. Once delivery cost lands on the stop rather than the kilo, dense and regional routes earn while thin rural and many-drop routes fall below zero.
Two accounts, same tonnage, opposite cost.
Equal on the rate card
Two accounts move the same annual tonnage at the same revenue. On a per-kilo rate they look like equally good business, and the fragmented one may be the bigger "logo".
Different on the road
Account A takes a few large, scheduled drops. Account B takes many small, urgent ones, with tight windows, frequent returns and far more admin per euro of revenue.
Cost to serve separates them
Time the stops, the waiting and the returns and Account A nets a healthy margin while Account B costs more to serve than it pays.
The fix is the service, not exit
Reprice the urgency, consolidate drops, widen the delivery window or set a minimum order. Most loss-making accounts turn positive without losing the volume.
Same tonnage on the rate card, one funds the other.
| Account A | Account B | |
|---|---|---|
| Annual tonnage | 1,200 t | 1,200 t |
| Annual revenue | €310,000 | €310,000 |
| Drops / year | 240 | 2,050 |
| Average drop size | 5.0 t | 0.6 t |
| Cost to serve (TDABC) | €214,000 | €352,000 |
| Net per account | +€96,000 | −€42,000 |
On the rate card both accounts carry their weight. By cost to serve, one is funding the other, and only the stop-level view tells you which to grow, which to reprice and which to redesign.
CUMULATIVE PROFIT, ACCOUNTS RANKED
Illustrative. Rank accounts by true profit and the curve rises well above your reported total before a long tail of loss-making accounts drags it back down.
Cost lands on the stop, not the kilo.
Map the work of a delivery
Stop, park, wait, unload, hand over, record, return: the activities a route is really made of, account by account.
Time and cost each one
TDABC costs each activity per minute of vehicle, driver and depot capacity, so unused capacity is visible rather than smeared across every shipment.
Attribute to account and route
Each account carries the cost of how it actually buys: drop size, density, windows, returns and admin, not just its tonnage.
Rank, then act
Accounts and routes sort by true margin. The losers become candidates to reprice, consolidate, re-window or set minimums for.
Account and route pricing on real cost.
Operators who price on true cost to serve stop chasing tonnage that does not pay and stop subsidising fragmented accounts out of the dense routes that carry the network. The same model feeds tender pricing, so new business is won on terms that hold rather than terms that quietly lose.
The model is built on your data and handed over, so the costing stays current as routes and accounts change.
Frequently asked questions
- Why does a per-kilo or per-shipment rate mislead in logistics?
- A blended rate assumes cost rises with weight or shipment count, but most cost is driven by the stop: drop density, dwell time at the door, failed deliveries and returns. A thin, many-drop route can cost far more per unit than a dense one and still be priced as if it were average.
- What drives cost to serve in a logistics business?
- Drop density and drop size, waiting and unloading time, delivery windows, failed deliveries, returns and the admin behind each account. Distance and weight matter, but they are usually not the largest drivers once the work is timed.
- How long does a cost-to-serve model take?
- A focused ProfitAudit 360 typically runs in three weeks on your existing operational and financial data, producing true margin by account and route and the pricing and routing actions that recover the most.
- Do we have to drop unprofitable accounts?
- Rarely first. Most loss-making accounts can be fixed by repricing the service, consolidating drops, changing delivery windows or setting minimums. Exit is the last resort, taken with the numbers on the table.
Find the routes that run below cost.
The Profit Check takes five minutes and no data upload. It points to where your blended rate is most likely hiding loss-making routes and accounts, and what it is worth to price them properly.
