Model failed COD deliveries as scenarios rather than a fixed industry rate

A COD failure scenario should distinguish successful delivery from return-to-origin and other outcomes. The relevant cost depends on transport charges, collection arrangements and the condition of the returned item.

Use your own courier terms and observed records. The rates and amounts below are hypothetical and are not an industry benchmark or a prediction.

Define the events

Separate a refused or undelivered parcel from a cancellation before dispatch. Identify whether the parcel returns, whether the goods can be resold and which charges apply.

Do not use one label for outcomes with different costs.

Keep customer treatment and applicable obligations separate from the cost model. The calculation does not establish a return or cancellation policy.

Set a transparent scenario

Suppose successful delivery has a stated incremental logistics cost of ₹100, while a failed dispatch-and-return event costs ₹180 on the same defined boundary.

In a hypothetical group of one hundred dispatches, assume ninety succeed and ten fail.

The stated logistics cost is 90 × ₹100 + 10 × ₹180 = ₹10,800, or ₹108 per dispatch. The ten-failure assumption is illustrative, not a claimed normal rate.

Compare a different assumption

If eighty succeed and twenty fail under the same costs, total logistics cost becomes ₹11,600, or ₹116 per dispatch.

This shows sensitivity to the event mix. It does not show the entire order economics.

Lost revenue, product condition, original product cost and cash timing need separate treatment where relevant.

Avoid treating returned stock as automatically lost

A saleable returned item may re-enter stock, while personalised or damaged goods may not. Record the actual recovery state.

Do not charge the full product loss in every failure scenario if the goods remain usable. Equally, do not assume full recovery without inspection.

Seek accounting advice for inventory treatment; keep the operational assumptions explicit.

Include collection and remittance conditions

Check applicable COD charges and how successful collections are remitted. Do not infer the schedule or cost from another courier's arrangement.

Reconcile delivered orders with the relevant reports. A delivery status and cash available to the business are not necessarily the same moment.

Do not use a generic fee percentage without checking the base and exceptions.

Use observed data proportionately

Track event counts over a defined period and note product or destination differences. A small sample may not establish a reliable long-run rate.

Avoid labelling a customer group risky from a few anecdotes. Focus on the order process and evidence you can legitimately use.

Unclear addresses or misleading delivery promises may reveal a process problem rather than an unavoidable channel cost.

Test preventative changes honestly

Better address confirmation or clearer delivery information may help, but do not promise a specific failure reduction without evidence.

Compare outcomes under consistent definitions and note other changes that could explain the difference.

A prevention step also has a cost in time or customer effort. Include it when evaluating the overall process.

Compare payment choices fairly

Prepaid orders may have different charges and failure outcomes, but they are not automatically free of returns or delivery problems.

Use the same cost boundary for each method and keep eligibility or customer preference constraints visible.

Do not use this scenario alone to decide which methods every customer should receive.

Reconcile by dispatch cohort

Group outcomes by the parcels sent in a defined period rather than comparing today's dispatches with unrelated returns received today. Some outcomes take time to become known. Mark unresolved parcels separately until their state is confirmed, so a temporary timing gap is not mistaken for a successful delivery or permanent loss.

Keep the decision revisable

Record event assumptions, applicable charges, recovery value and excluded costs. Update the model when courier terms or observed patterns change.

Use scenarios to plan cash and contribution, not to present a universal failure percentage.

The value of the exercise is clarity: it shows what a failed delivery costs under defined conditions and which assumptions most affect the result.