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Distribution & Wholesale

Know which accounts actually pay.

In distribution, 15–25% of customers are typically loss-making once true cost-to-serve is calculated — subsidised by your most efficient accounts. ABC / TDABC reveals exactly which, and why.

INDUSTRY · DISTRIBUTIONCOST & PROFITABILITY

REVENUE VS COST-TO-SERVEREVENUECOSTAccount A+18%Account B+3%Account C−14%

The problem

The average-margin mirage.

Distributors live on thin gross margins and high volume. Averaged across the book, the business looks healthy — but small, frequent, high-touch orders cost far more to serve than the average assumes, and quietly consume the margin earned elsewhere.

Why it matters

Subsidised accounts you can’t see.

Order frequency, drop size, returns, payment terms and special handling vary enormously between customers. Without true cost-to-serve, your best accounts subsidise your worst — and discounting decisions make it worse.

Cost visibility maturity

How well do you cost each account?

Level 1

01

Reactive

Margin judged on gross margin per line. No view of cost to serve each account.

Level 2

02

Structured

Customer gross margins tracked. Service cost — picking, delivery, returns — still blended.

Level 3

03

Analytical

Activity-based costing of warehousing, delivery and admin. Cost-to-serve by account emerging.

Level 4

04

Optimised

TDABC cost-to-serve by account and order — a live tool for pricing, terms and rationalisation.

How we engage

Three steps to true cost-to-serve.

01

Profit Check

A free diagnostic to estimate how many of your accounts are likely loss-making once order frequency and handling are costed.

02

ProfitAudit 360

A 5–25 day engagement delivering a customer-profitability whale curve, true cost-to-serve by account, and a pricing and terms roadmap.

03

Commercial implementation

We support repricing, minimum-order and surcharge design, and account rationalisation grounded in real margin.

Comparing approaches

Gross margin, ABC, or TDABC?

Approach	Account Accuracy	Order-Pattern Cost	Updates at Scale
Gross Margin per LineRevenue minus COGS	✕	✕	✕
ABCActivity-Based Costing	✓	~	~
TDABCTime-Driven Activity-Based Costing	✓	✓	✓

✓Strong~Partial✕Weak

FAQ

Frequently asked questions.

How many accounts are usually loss-making?

Across most distributors we model, 15–25% of accounts are margin-negative on a full cost-to-serve basis — masked by healthy-looking average margins.

What drives the difference between accounts?

Order frequency, drop size, returns, special handling and payment terms. Two accounts with identical revenue can have very different true margins.

Do we need new systems?

No. We build on your ERP, WMS and delivery data — no new platforms required.

Can we fix loss-making accounts without losing them?

Often yes — through minimum order sizes, delivery surcharges, term changes or re-routing. The model shows which lever works for each account.