Wholesale Cost-to-Serve Analysis That Stops Margin Leaks

Wholesale cost-to-serve analysis often feels like detective work. You know money is disappearing somewhere between inbound receiving and final delivery, but the trail looks more like fog than footprints. Search trends show operators asking why are my wholesale margins shrinking or how do I calculate cost-to-serve, usually after a retailer season pushes costs up without warning.

If you have ever looked at a P&L and felt personally betrayed, you are in good company.

Why cost-to-serve matters in wholesale

Wholesale operations are complex. Every retailer has different compliance rules, different pallet standards, different labeling requirements, and different fines. The cost to serve one retailer may be double the cost to serve another even if the order volume looks identical on paper. Brands that do not measure these differences correctly end up subsidizing their most expensive channels.

Joel Malmquist, VP of Customer Experience at G10, put it plainly. "If you do not do it right, you get those massive chargebacks." Cost-to-serve is not theoretical. It is a survival metric.

Where wholesale cost-to-serve calculations go wrong

Most brands track costs at the shipment level instead of at the activity level. They see freight charges, pick fees, and storage costs, but they do not see the hidden layers that drive their margins down. Rework time. Compliance corrections. Label reprints. Mispick recovery. Appointment rescheduling. Chargeback disputes. Returns processing. Each of these adds cost and complexity.

Connor Perkins, Director of Fulfillment, sees these gaps constantly. "One of the pain points our clients have experienced with previous 3PLs is inventory accuracy. Maybe their previous 3PL was not great at picking the orders accurately. So they were losing money by shipping wrong items or wrong quantities of items." Mispicks alone distort cost-to-serve dramatically.

Why D2C metrics distort wholesale cost understanding

D2C metrics focus on units per hour, parcel speed, and cost per pick. Wholesale metrics must focus on carton prep, pallet quality, retailer-specific workflows, and multi-PO complexity. A D2C-first 3PL may report healthy efficiency numbers while quietly creating massive chargebacks and rework expenses behind the scenes.

Bryan Wright, CTO and COO, explained why wholesale cannot rely on lightweight systems. "A bad WMS will not track inventory 100 percent. A good WMS tracks inventory through the warehouse at every point you touch it." Cost-to-serve clarity requires full visibility.

How slow communication inflates cost-to-serve

Retailers update rules constantly. If a 3PL communicates slowly, teams use outdated requirements and spend hours correcting mistakes later. Many 3PLs force clients into ticket queues where simple questions take days, creating rework loops that quietly inflate the cost of every shipment.

Joel described the bottleneck. "At some 3PLs you get thrown into a ticketed queue, and you get different people replying every time. It can take days, if not weeks, to get a resolution." Delayed answers are expensive answers.

G10 solves this through direct communication. "You call one person. That is it. And things get done," Joel said.

What accurate cost-to-serve analysis looks like

A clean cost-to-serve model tracks every operational touch: receiving, putaway, picking, kitting, labeling, palletizing, ASN creation, and returns processing. It identifies retailer-specific workflows and assigns costs accordingly. It reveals where operations run smoothly and where friction creates avoidable labor hours or fines.

Connor explained how onboarding creates clarity. "When we onboard a client who sells into places like Amazon or Walmart, the process changes depending on where they are selling. We work through all of their routing guide requirements and make sure the warehouse is ready before the first order ever drops." Good setup lowers cost-to-serve immediately.

Cost-to-serve under pressure: real examples

Cost-to-serve spikes during the hardest operational moments: late inbounds, urgent retailer demand, or seasonal volume peaks. Some 3PLs hide these cost spikes until the invoice arrives. G10 illustrates them in real time and works to reduce them.

Joel shared a moment when a port-delayed shipment needed urgent turnaround for Target. "Our supervisor, warehouse manager, and several employees worked the entire day into the night, then came back at 5 a.m. to make sure we had the routing completed." This kind of pressure scenario shows exactly where cost-to-serve increases, and why disciplined operations matter.

Another example came from a viral D2C surge. "The client asked, Can you help us? And we said, Yeah, we gotcha. Then we sent a truck to the carrier at midnight." Fast action prevented downstream penalties and reduced cost exposure.

The bottom line for wholesale brands

Cost-to-serve is not a finance exercise. It is an operational truth-telling tool. When you understand your real costs, you stop subsidizing inefficient workflows, stop absorbing retailer penalties, and start making smarter decisions about where and how to grow.

If you want cost-to-serve analysis that leads to better margins and cleaner wholesale execution, reach out to G10. You will get real visibility, accurate data, and operations that keep your bottom line protected.