Activity Based Costing

Activity Based Costing is a method of charging for services, such as Warehousing, where the customer is only paying for services as and when they are completed.

There are a number of different charge methods related to Warehousing. Activity based is the most common, but Cost Plus and Item Rate may also be applied.

Cost Plus given the provider the ability to perform services with resource and materials as required, which it then charges back to the customer with a management fee on top. This method leaves the inventive on the provider to charge more not less.

Item Based charges bring all fees back to a single cost per item processed. Whilst this option may seem attractive, it leads to ongoing disputes as a customers business profile changes into the future, and comes with a potential huge cost variance issue based upon the calculation.


The benefit of the ABC model is that it is totally transparent with upfront declared costs. The customer can model the charges to the consumer by completely understand what charges to expect from the provider in advance.

In addition the weekly or monthly charges rise and fall with customer activity, ensuring no large bills on weeks of low order volumes.

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Contact Details

Next Logistics is a dynamic forward thinking organisation, with a strategy of changing the way suppliers and customers currently work and interact. The goal of Next Logistics is to deliver consistently competitive rates to all customers, yet work with service providers to ensure revenue and profitability is maintained. To find out more information about Next Logistics visit the About Us section of the website.

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