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Logistics cost to revenue: formula and example

Logistics Cost to Revenue (LCR) shows what share of revenue is taken up by transportation, warehousing, fulfillment, and returns costs. It helps keep a balance between service (SLA) and margin and find opportunities for optimization.

What the metric measures

The share of logistics costs in revenue and their structure: transportation (inbound/outbound/“last mile”), warehousing/storage, picking/packing, 3PL, reverse, damage/shrinkage, IT, and overhead.

Calculation

  • LCR, % = Σ Logistics costs / Revenue × 100 (excluding VAT)
  • Transport-to-Revenue, % and Warehouse-to-Revenue, % — for the structure
  • Cost per Order = Σ Logistics costs / Orders; also per kg/parcel/stop
  • For Cost-to-Serve: (Transportation + Warehousing + Fulfillment + Reverse + Overheads) / Segment revenue
  • Separate capex/lease and opex; include packaging and repeat delivery attempts

Agree on the set of cost items, currencies/periods, overhead allocation rules, and the reverse policy.

Calculation example

Monthly revenue is 4,000,000. Delivery costs 180,000, warehousing 70,000 and packaging 30,000. Logistics cost to revenue = 280,000 / 4,000,000 × 100 = 7%. For orders under 500 the figure is 18%, so small orders deserve a review.

Data sources

ERP/1C (GL, revenue), WMS (storage/picking), TMS/carriers (rates/invoices), 3PL reports, returns module, HR/timesheets, energy costs, packaging purchases, CRM/OMS.

Interpretation

  • LCR↓ — better rates/routes, dense deliveries, a productive warehouse, low returns
  • LCR↑ — expensive modes, low density, a scattered network, a high share of reverse/damage
  • Balance LCR ↔ SLA/NPS; speed and narrow delivery windows increase costs

Useful breakdowns

  • Channel/segment; region/zone; carrier/mode
  • PUDO vs. courier; split shipments; number of delivery attempts
  • Dimensions/weight; SKU categories; 3PL vs. in-house
  • Route density; warehouse productivity

Dashboard visualizations

  • Waterfall of costs and LCR trend by channel
  • Heatmap of LCR by region/carrier
  • CPO/kg/parcel panels and a margin map (AOV/margin vs. CPO)
  • OTIF/OTD → LCR correlations; Pareto of returns/damage

How to set targets

Set LCR targets and CPO thresholds by channel; rules for split shipments, first/second attempts, and carrier selection; update rate cards every six months and track the drivers: load factor, density, packaging, productivity, reverse rate.

Common mistakes

  • Calculating from revenue including VAT; mixed currencies/periods
  • Ignoring “small” items (packaging, pickup points, damage, repeat attempts)
  • Unallocated overhead; comparing channels without accounting for SLA/geography
  • Counting only 3PL invoices without internal costs; ignoring split shipments

Questions for discussion

  • What will deliver −10% CPO: consolidation, multi-carrier, PUDO, or a change of packaging?
  • What is the effect of a 20% reduction in reverse rate on LCR?
  • Where is the profitability limit for express delivery given your AOV?
  • Which warehouse configuration is optimal for your order density?

Questions and answers

How do you calculate logistics cost to revenue?

Share, % = all logistics costs (delivery, warehousing, packaging, returns handling) for the period / revenue for the same period × 100.

What should logistics costs include?

Transport, carrier and warehouse services, warehouse rent and staff, packaging materials and returns handling. Count them the same way every month.

How do you reduce the logistics share?

Set a minimum order value or free-delivery threshold, consolidate shipments and review carrier rates and routes.