Help on customer profitability versus delivery costs project

Hi all,
I just had an assignment and I have problem getting a work plan:
My boss came to me and said:
1- He wants a customer profitability analysis
2- He wants scenarios on How delivery costs affect customer profitability
To be more specific, he wants to reduce his delivery costs expenses and therefore increase his customer profitability.

I have access to accountant files.
Please, help me with your experience

Thanks
By the way, Im from Montreal, Canada

Tanguy

Perhaps you could have a small order surcharge, say that for any orders under $200 you will add the cost of transport say$50.

We have done something similar in the past, either the customer purchases more from you or pays the surcharge.

Regards,

Steve

Thanks a lot,but can you be more detailed, please.
I mean where do I stat and what do i look for?

Thanks again

Sorry mate,

Run list of customers who purchased under $200 dollars of stock.

Run list of profit margin made for said sales to said customers.

Run list of transport costs for said customers.

Compare difference in profit margin with customers who have purchased say between $200 and $400 dollars (running above lists).

Hope it helps.

Regards,

Steve

Hi Tanguy,

Your bosses two questions are linked, but there are many more elements that impact on customer profitability than delivery costs alone. Steve is correct you could make a surcharge for small customers; you may find that doing a pareto analysis of your customers shows roughly 20% of them account for 80% of your business and more importantly 80% of your customers account for 20% of you business, often servicing this small majority makes your company extremely busy, but for less profit than you might think. Re-cost some jobs as an exercise and leave no stone unturned, you may find some hidden costs.

Also is there ever a case where you do not meet delivery quantities ‘in full’, if so this may increase your delivery costs because of having to make more than one delivery to fulfill the order.

Just a couple of thoughts, hopefully others will add to the brainstorming.

Regards,
Simon