A successful delivery can be profitable while a dispatch batch earns much less than expected. Return to origin costs belong to the failed parcels, and those failures must be considered alongside the delivered orders. The RTO calculator works with expected outcomes across a batch rather than pretending every dispatch succeeds.
Define one delivered order and one failed order
Take 100 dispatches with an assumed 20% failure rate. Enter PKR 350 profit for each delivered order. For a failure, use outward courier PKR 200, return courier PKR 150, packaging PKR 50 and advertising PKR 100.
Those failed order expenses total PKR 500. Set inventory loss to zero if the PKR 800 product comes back fully recoverable at cost. A returned product is not automatically a fresh PKR 800 expense merely because delivery failed.
Combine both outcomes
The expected split is 80 deliveries and 20 failures. Deliveries contribute PKR 28,000, while failed parcels lose PKR 10,000. Expected batch profit is PKR 18,000, or PKR 180 per dispatch.
With a delivered contribution of PKR 350 and failed loss of PKR 500, the model’s zero profit failure rate is about 41.18%. This is a mathematical boundary under the entered assumptions, not an acceptable operational target or a prediction of customer behaviour.
Damaged stock changes the failed order loss
If only half the PKR 800 product cost is recoverable, enter 50% unrecoverable inventory. The added PKR 400 takes failed loss to PKR 900. At the same 20% failure rate, expected batch profit falls to PKR 10,000.
Use a recovery estimate grounded in inspection records. A recoverable item may still take time to resell, but delayed cash and actual inventory loss are different problems. Inventory Cash Gap Calculator addresses an entered funding cycle without calling intact stock a loss.
Replace assumptions with a consistent dispatch cohort
Count failures and dispatches from the same batch and allow enough time for delivery outcomes to settle. Mixing last month’s failures with this week’s dispatch count can distort the rate.
Fractional expected deliveries are allowed in planning because probabilities need not produce whole counts. Real parcels remain whole units. If delivered profit is zero or negative, improving delivery success alone cannot create the positive contribution assumed by a break even threshold. Use COD Order Profit Calculator to review the underlying delivered order first.