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Making Room for Savings: Cost Analysis of a Federal Warehouse Shared Service

Case Study

Making Room for Savings: Cost Analysis of a Federal Warehouse Shared Service

With operating costs that exceeded fees and revenue, a federal agency’s secure warehouses were doing just that: taking up space. Using cost data and activity mapping analysis, Censeo identified which facilities were losing the agency money, and helped the client utilize pricing models for future service offerings.


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.


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.



Based on this analysis, Censeo determined that only one of the seven service areas was fully recovering costs. The team made recommendations to address the deficiencies in the other six areas, including eliminating the use of two shared service facilities whose costs were too large to be covered through pricing changes. Censeo also recommended adopting a two-tiered pricing approach (e.g., including a flat order charge plus a volume charge) for some service areas, and changing pricing levels in others to offset costs. These changes helped restore full cost recovery for the organization and provided management with the tools to ensure cost recovery moving forward. Finally, Censeo developed a reusable management tool that allowed leadership to evaluate different pricing and volume mixes, empowering the agency to make effective and efficient financial decisions for the warehouse shared services in the future.