The Costing Game: Are We Making Any Money Doing This?

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How often have you heard the question "Are we making any money doing this?" and the answer "I don't know, we don't have the data." The collection of cost data that can be related to a specific functional area or to a specific customer is challenging for most warehouse managers and third party logistics service providers (3PL's). Reasons include:

• Cost data is captured at a higher level than the activity that created the cost; for example, labor cost is aggregated by facility and not by specific activity.
• Cost data is captured and archived by function without detail on specific tasks or customers.
• Accumulated costs are missing important components; e.g., packaging and other indirect materials, administrative and indirect labor, etc.

For the warehouse manager, gathering detail on the true costs of receiving, storage, picking, value-added processing, special packaging, staging and loading is fundamental to performance assessment and benchmarking. Without the specifics, it's virtually impossible to identify opportunities for improvement or to develop a tactical plan for performance optimization. Moreover, the absence of detail precludes profiling costs by order type or customer to provide feedback to sales on the impact of concessions, special deals or promotions offered to the marketplace.

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