Worksheet: Allocate delivery, returns, payment and service by channel

When costs are spread by sales, a free delivery, a return or a support call costs nothing on paper. This sheet allocates each cost by the activity behind it, for last quarter, and puts the result beside margin in the next channel review. It builds the Competent step of the check:

Fulfilment, delivery, returns, payment and service costs are allocated by activity drivers (orders, parcels, returns, contacts), giving a cost to serve by channel and offer that people trust.

Step 1. From a spread to a driver, line by line

Cost line	Poor (spread by sales)	Good (by activity)	Driver we will use	Cost last quarter ($)	Rate per driver
Fulfilment (pick and pack)	In overhead	Per order, plus per item
Delivery	Total freight spread by sales	Per parcel, by zone and speed	e.g. parcels by zone	$1.9m	e.g. $9.80 metro, $16.50 regional
Returns	Not counted	Per return, including handling and write-off
Payment fees	In overhead	Per transaction, by payment method
Service contacts	In overhead	Per call, chat or email
Click and collect	In store costs	Per collection

Step 2. By channel and order type

Channel	Order type (e.g. standard, express, click and collect)	Orders	Average basket ($)	Cost to serve per order ($)	Margin per order before cost to serve ($)	Margin after ($)

Step 3. Get it accepted and used

Check	Done?
Finance agrees the rates
Channel managers agree the drivers
Cost to serve sits beside margin in the next channel review (date)
One decision it changed

Done when: fulfilment, delivery, returns, payment and service costs are allocated by activity drivers. Finance and the channel managers accept the result by channel and offer.

Adapted from our own pricing self-assessment (PSP, 2004).