Determining the expense associated with fulfilling each individual order is a critical aspect of cost management for businesses that handle product distribution. This calculation involves summing all direct and indirect expenses incurred during the process of receiving, storing, picking, packing, and shipping goods, then dividing that total cost by the number of orders processed during the same period. For example, if a company spends $10,000 on fulfillment activities in a month and ships 500 orders, the fulfillment expense per order is $20.
Understanding the cost of fulfilling each order allows businesses to accurately assess profitability, identify areas for operational improvement, and make informed pricing decisions. By tracking these expenses, companies can benchmark their performance against industry averages, optimize their supply chain, and ultimately enhance their bottom line. Historically, businesses relied on manual methods for calculating these expenses, but advancements in technology and logistics software have streamlined the process, enabling greater accuracy and efficiency.
