Want pricing that reflects your real costs? Start by understanding what each order actually takes to fulfill.
For years, pricing in the glass, ceramics, and refractories distribution business has followed a familiar formula: product cost plus markup. But in today’s landscape—marked by variable freight rates, custom handling, and rising labor costs—that approach is dangerously outdated.
Distributors across North America are adopting Activity-Based Costing (ABC) to price smarter, preserve margin, and stop subsidizing unprofitable orders.
What Is Activity-Based Costing?
Unlike traditional costing, which averages expenses across orders or customers, ABC assigns costs based on the actual activities required to fulfill a specific order. This is critical in materials distribution, where a 1,000 lb. load of dense firebrick doesn’t cost the same to handle as a pallet of kiln posts—yet many distributors price them using the same markup logic.
ABC in a Distribution Context
Here’s how ABC works for a ceramic distributor:
Identify activities: Receiving, staging, packing, cutting, delivery, quote preparation, tech support.
Assign costs: Determine labor and overhead per activity (e.g., $12 to stage, $18 to cut, $55 to crate).
Track activity usage: Not every SKU or customer uses all services. A simple reorder of alumina discs might use 3 activities; a custom quote for cordierite saggers might use 7.
Roll up true cost per order: This reveals which SKUs are costlier to fulfill than their gross margins suggest.
Real Example: ABC Impact on Glass Pricing
A distributor in Ontario implemented ABC on their architectural glass line. They found:
Standard ¼” clear glass panels had a fulfillment cost of $24/order.
Custom-coated, edge-polished panels had a fulfillment cost of $88/order—due to labor, packaging, and coordination.
Yet both were being priced at a 30% markup.
Using ABC, they adjusted pricing for custom panels to reflect actual effort. Not only did margins rise, but customer behavior changed—clients began consolidating custom orders, reducing fulfillment friction.
Benefits of ABC for Pricing
Unmasks low-margin customers who require disproportionate effort.
Improves quoting accuracy for specialty glass or ceramic orders.
Aligns pricing with complexity, not just cost.
Justifies surcharges like cut fees or small-order premiums.
For refractories, ABC also helps pinpoint whether low-volume castable orders are worth servicing—or should shift to MOQ-only models.
Getting Started
Start small: Apply ABC to 1–2 product families (e.g., kiln furniture, laminated glass).
Use time studies or labor logs to measure task costs.
Integrate findings into your pricing model, even if just for internal margin visibility at first.
:
Activity-Based Costing isn’t just an accounting exercise—it’s a competitive advantage. In a world where every custom cut and extra quote eats into margin, knowing your true service cost is the only path to profitable pricing. For distributors of technical glass, ceramics, and refractories, ABC turns intuition into intelligence—and revenue into profit.
