You don’t need a finance department to protect your margins.
You just need visibility — and a simple, consistent way to track it.
In this guide, I’ll show you a pragmatic path to customer-level contribution margin that any 3PL can adopt — even if you’ve never done it before.
📍 Why Start Here?
Tracking contribution margin at the customer level gives you:
- Early warning signs before profits vanish
- Clear insight into which clients are worth scaling
- Data to drive pricing and ops decisions
And best of all?
You can do it with the numbers you already have.
🎯 Step 1: Pick a Time Window
Start with monthly.
- Weekly = too noisy
- Quarterly = too slow to act
Monthly gives you the right blend of clarity and speed — and works with most invoicing cadences.
💰 Step 2: Pull Revenue Per Customer
This part’s usually straightforward. Include:
- Storage fees
- Inbound/outbound handling
- Pick & pack
- Packaging/materials
- Freight markup (if applicable)
If you bill for it, it goes here.
💸 Step 3: Estimate Variable Costs
This is where most 3PLs stall. But it doesn’t have to be perfect — just directionally useful.
Focus on direct, usage-based costs per customer, like:
- Direct labor
(Use time tracking or % of warehouse hours allocated per client) - Packaging materials
- Freight pass-through costs
- Other surcharges (e.g., pallet rental, temp control)
Back-of-the-napkin math is better than flying blind.
📊 Step 4: Calculate Contribution Margin
Use this formula:
(Total Revenue – Variable Costs) ÷ Total Revenue = Contribution Margin %
Look for:
- ≥ 30–40% = healthy
- < 25% = red flag (unless your model is unusually lean)
🧠 Step 5: Rank and Act
Sort customers by contribution margin.
Then layer in:
- Total revenue
- Order volume
- Operational complexity
This reveals:
- 🔴 High-revenue, low-margin clients → renegotiate or re-scope
- 🟡 Low-revenue, high-margin clients → explore growth
- 🟢 High-margin, high-volume clients → protect and scale
🔁 Make It Stick
- Set a monthly or bi-monthly review cadence
- Use charts or scatterplots to show margin trends
- Build it into account reviews, not just finance reports
- Use this data to filter new prospects early
🚀 When You’re Ready to Go Deeper
Once customer-level tracking becomes routine, consider:
- Service-level contribution margin (e.g., storage vs pick/pack)
- Order-level margin using WMS time tracking
- Forecasting margin impact of new client proposals before you say yes
You don’t need perfect data.
You need enough clarity to make smarter decisions — and to protect what actually keeps your 3PL profitable.
