Calculating order fulfilment costs is an extremely important part of the process for your ecommerce business. Ultimately, costs will vary depending on your supplier, but a fulfilment centre considers various aspects throughout the fulfilment process in order to calculate an overall cost per order.
Additionally, pricing structure is determined by the amount of orders, the type of product and add-ons that may incur further costs depending on what your requirements are.
Our guide below will take you through the various aspects a fulfilment centre considers when calculating fulfilment costs.
Order fulfilment costs – what are they?
Fulfilment costs are determined by multiple factors, so there are various criteria to consider for orders and for each ecommerce business. Due to the differing nature of merchants’ businesses, there isn’t a set-structured cost that is applicable across the board.
A fulfilment centre with a flexible, tailored approach will consider your business on an individual basis, learning more about what it is a business offers and partnering with the merchant, to take a more holistic approach in determining the best solution for each customer.
Fulfilment cost factors
Initially, the properties of a product are important, considering factors such as weight and the type of product. The number of orders or SKUs per order will then be ascertained.
The shipping method is obviously significant, as express or standard delivery costs will differ greatly from European or global shipping options. Destination, weight, dimensions and the carrier used will also be determining factors.
Comparing fulfilment cost per order
Because of the fluid nature of the business and differences in ecommerce stores, it is very challenging to try and compare the cost per order. Depending on which fulfilment centre you partner with will determine factors such as automation and the level of order management system usage needed.
If you want to try and draw comparisons on data or trends to keep track of your expenditure, deploying an internal method of historical comparisons is the most effective way to assess your fulfilment cost per order.
The breakdown of fulfilment costs
Now you know how order fulfilment costs are considered, it is important to understand each individual component within the full breakdown of overall fulfilment costs. Below are the six most common charges associated with order fulfilment:
- Set Up Fees: Initially, you’ll require a fulfilment centre to set up your ecommerce business, with seamless integration of all marketplaces and shopping channels, setting up warehouse space and EDI set up.
- Costs of goods and services: The cost of goods receipt is determined by the type of delivery a warehouse receives. Again, this will depend on the number of orders and products you are shipping. Goods arriving on pallets can be arranged swiftly, whereas non-palletised goods will require a thorough approach. Also, counting and inspecting goods for any damage and arranging them into the allotted location within the warehouse is contained within this phase of the process. A fulfilment company may pre-determine a set price for this service, rather than hourly charging.
- Cost of storage: Typically, the amount and type of goods dictates the cost of storage. As there are such variations in products, certain lines may require additional storage methods than others.
- Picking and packing: The pick and pack part of the process will be determined by the level of products and SKUs for a store. Depending on