3PL contract margin

What is cost to serve in a 3PL?

Cost to serve is what it costs to handle one client's work: the labour hours, the space, the handling and any service extras, set against what that client pays. It often varies between clients far more than the rate card suggests, because the order profile, the timing and the mix drive the work as much as the volume does.

How do you know if a 3PL contract is making money?

Tie the hours and handling each client's work actually takes back to what the contract pays, then separate what the operation controls from what the client's forecast caused. A contract can be run tightly and still miss its margin, because the orders arrived in a different volume, mix or timing from the ones it was priced on.

Getting most of the day attributed to the right client is enough to see which contracts pay. Perfect attribution usually costs more to run than it tells you.

Fettle shows on time and in full client by client, so one struggling contract shows up as that contract rather than as the whole warehouse. It also shows where the paid hours go, including the work the systems never recorded.

On time and in full

Why can a well-run contract still lose money?

Because a 3PL is priced and resourced on what the client said would come. When the real volume, order profile or timing is different, the same team works just as hard on a job that no longer matches the price. Seeing that clearly gives you evidence for your pricing conversations and gives the client the cost of its own forecast.

A figure blended across every client can look fine while one contract loses money on each order it sends. At one 3PL we work with, building the weekly, monthly and quarterly service packs for clients by hand also takes a lot of the management team's time and energy.