Pricing logistics services: per kilometre, per pallet, per shipment or contract

Pick the unit by doing the sums on your own costs, then quote in the unit where those sums leave you with room. Take the figures from your last month of books and fill in the blanks. The worked numbers are invented: a small warehouse in Amravati that stores edible-oil cartons and packed foods for three distributors, and a single 10-tonne truck on the Amravati to Nagpur run. Replace every one of them with yours.

Step 1: find what one unit of capacity costs you

Quoting starts with what you carry or hold, not with the market. Fill in your monthly figures for the space or fleet you are pricing.

The honest line is the one that matters. Divide by 400 and you get a lower cost than you will earn against, and every quote built on it loses money in a slack season.

A fleet owner fills a similar sheet with fuel, driver, toll, instalment, insurance and repairs, then divides by the loaded kilometres, not every kilometre covered. With invented figures for one truck: instalment ₹40,000, driver and helper ₹30,000, insurance, permit and tax ₹10,000, tyres and repairs ₹15,000, fuel about ₹1,54,000 and toll ₹20,000 for 6,000 km a month, total ₹2,69,000. If only 4,200 of those kilometres are loaded, the cost is about ₹64 per loaded kilometre. Divide by all 6,000 and you would get ₹45, and lose money on every trip.

Step 2: add the margin and the empty running

Write down the margin you need on top of cost: ____ per cent. In the example it is 15 per cent, giving about ₹1,070 per pallet position per month, and about ₹74 per loaded kilometre for the truck.

For a vehicle, the empty return is already inside the loaded-kilometre figure above. If your return loads are better or worse than the 70 per cent loaded share in the example, change that share, and use the one you actually get, not the one you hope for.

Step 3: turn the cost into each unit and look at the result

Now convert the same cost into the other units, so you can see which one gives you room.

• Per pallet per month. Your figure from Step 2. In the example, about ₹1,070.
• Per pallet per day. Divide by the days a typical customer's stock stays, and add a handling charge for each movement in and out. If distributors turn stock in nine days, a flat monthly rate over-charges the fast ones and the slow ones will notice.
• Per trip or per kilometre, for vehicles. Per trip suits a fixed route and a full load; per kilometre suits changing drops. In the example, about 155 loaded kilometres to Nagpur at ₹74 gives roughly ₹11,500 a trip. Work out both from the same cost sheet and check that they agree on the routes you run most.
• Per shipment. For a courier-style customer sending many small consignments, take the trip cost and divide by the consignments the truck really carries. If a trip usually holds 25 consignments, ₹11,500 comes to ₹460 each before any handling charge. Count the load factor you get, not the full-truck figure.
• Contract. A fixed monthly figure for a stated volume band. Check it against the cost sheet at the bottom of the band, not at the top.

Ask which unit shows a gap between you and a rival. In this invented case the rivals all quote rent per square foot. The warehouse's cost is driven by movements, so a pallet rate with a separate handling charge shows customers where the stock-accuracy work goes, and a bare area rent does not. The risk: a buyer comparing only the headline number may still pick a rival, and the warehouse should accept losing some enquiries that way.

Step 4: write the inclusions line

Whatever unit you pick, the buyer should see what is inside it. Fill in:

"Rate: ____ per ____. Includes: ____. Extra: ____. Valid until: ____. Questions to: ____."

For the example: "Rate: per pallet position per month for stock that turns within the stated period. Includes receiving, put-away and a stock statement at the intervals you agree. Extra: handling beyond the agreed movements, damaged-pallet repacking, loading to special vehicles."

Keep the extras short and named, so a buyer can spot a rival whose lower number leaves unloading, waiting or returns to be argued about later.

Step 5: test the rate against three real customers

Run three actual customers or recent enquiries through your sheet.

1. A customer who stores stock for a long time and moves it rarely. Does the monthly rate cover your cost on it?
2. A customer who turns stock fast. Does the handling charge cover the extra labour?
3. A customer who asks for a contract. At the bottom of the volume band, is the rate still above cost?

If one loses money, change the rate or the band, not the story you tell the buyer.

Where the sums mislead

The worksheet gives you a floor, not a price. A buyer may pay more for reliability you can prove, and you may go below target on a lane you want for the volume. Make that choice knowingly and record why.

A fixed contract rate is a promise from both sides. Before you offer one, agree in writing what happens when volume falls below the band or rises above it, how a change in fuel or power cost is handled, who pays for waiting and failed deliveries, and how either side exits. Skip the contract if the buyer cannot predict volume, or if you cannot spare the space or vehicles for them without turning other work away.

How shippers pick a provider for the first load shows what the buyer weighs beside the rate.

Hand the sheet to someone else

Give the filled sheet to your accountant and ask one question: does the cost line match the books? If not, fix the sheet before you quote anything. Pricing and packaging strategy is the related work for turning costs into rates, and logistics is the wider section for carriers and warehouses. If you want help with your own sheet, tell us what you need.