Situation
The warehouse shared services included a set of operations spanning four locations and seven service areas, making alignment of costs and services difficult. Pricing was based on antiquated approaches, and did not align with underlying cost drivers. The agency needed to determine whether the services were fully recovering costs, and if not, how pricing should be changed to improve cost recovery.
To address these issues, the client engaged Censeo to conduct an activity-based cost analysis of agency operations, and to develop a pricing model that could be continually updated to validate service prices.
Approach
Censeo collected detailed cost data about the client’s operations, and surveyed employees to understand time allocation across the activity areas. Combining these two data sources, Censeo constructed a detailed activity-based cost model that allocated costs across each of the facilities, and aligned these costs with the services supported by each.
Censeo had identified the cost of operating each of the facilities—but were the fees covering the costs? The team analyzed the fees associated with each location and service area to determine which facilities were making–or losing— money for the agency. Based on the cost analysis, Censeo identified cost drivers to help inform future pricing decisions, and adjusted the pricing structure and pricing level for each service area accordingly.