How to Calculate Fulfillment Cost Per Order

Fulfillment cost per order (CPO) is the sum of all the warehousing expenses involved, including:
  • receiving, putting away and storing the product.
  • fulfilling orders through picking, packing, shipping.
  • reverse logistics or returns processing from customers.

Historically, fulfillment managers only looked at the labor portion of the CPO. But, this may only be 50% of the costs. A fully loaded cost per order is a better metric and includes facilities and occupancy costs and packing material costs.

This blog shows you how to calculate the fulfillment cost per order, cost per line, and cost per box shipped.

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The True Cost of a Backorder

A backorder is a customer order for a product from a retailer or supplier that cannot be shipped immediately or by the promised date.  Simply stated, backorders are a temporary out of stock condition.  An order is not a sale that you can take to the bank until the item is shipped or picked up at the store, the transaction is invoiced, and funds are deposited.

The rate of backorder – the percentage of order lines that cannot be shipped out of the total items ordered for the day - is an excellent measure of your inventory management and the customer service you are providing.  An even better measure is the initial customer order fill rate, discussed below.

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27 Point Checklist for Third-Party Logistics (3PL) Contracts

After months of working with prospective third-party logistics (3PL) vendors, you likely received hundreds of pages of selling materials and many verbal promises. A contract will memorialize:

  • the statement of work (SOW) and the 3PL services you are contracting for
  • the standards of performance
  • the pricing of various 3PL services
  • the payment terms
  • a host of legal clauses such as warranty and guarantees, and termination of the agreement

This blog acts as a checklist of contractual considerations to assist you in negotiating a 3PL contract that is fair and a win/win for the client and the 3PL provider acting as your outsource fulfillment provider. 

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How to Reduce Fulfillment Expenses by Streamlining Your Supply Chain

Supply Chain Management (SCM) includes all of the business processes, systems, and services needed to move raw materials and finished product from manufacturers to retailers, distributors, and customers. Like a chain, it is only as strong and efficient as the weakest link. There are many opportunities to make most company’s SCM more efficient, reduce costs, and provide higher service levels to customers.

A typical Supply Chain including Warehousing, Distribution, Information Technology and Transportation Services is pictured below and includes:

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How Companies Save Money Using Third-Party Logistics (3PL)

3PFFor more than 30 years, we have assisted clients in the selection, evaluation, and implementation of third-party logistics (3PL) projects. Clients using 3PL applications span a wide range of companies and industries, including ecommerce, wholesale, retail companies, pharmaceutical samples, collateral distribution, and more. While third-party logistics can benefit a variety of industries, 3PL is not for every company.

Much of our consulting has been in internal fulfillment. This experience provides us perspective on how to compare the cost, service levels, and benefits of both fulfillment models. It is important to fully understand the potential benefits for your company if you are considering 3PL to augment or replace internal fulfillment and distribution.
Let us help with 3PL vendor selectionHere are 6 major ways multichannel businesses benefited from using 3PL and 19 examples of how companies used 3PL profitably:

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14 Considerations for Efficient Ecommerce Peak Season Fulfillment

For retailers and ecommerce companies, peak season can represent 60% or more of the annual sales and an even higher percent of the profit. If you’re a manufacturer or distributor, your business may be dependent on a good holiday season, too. 

By now, your peak holiday season planning for this year should be well underway. If you’re behind schedule, there’s still time to implement improvements. But, you need to be prudent and not over-commit.  Even if you did not do a formal post season analysis, here are some topics to help get you thinking about being more prepared.  

Plan ahead with these 14 critical considerations for improving ecommerce peak season operations and fulfillment this year:

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3 Critical Projects to Off-Set Rising Labor Costs

Four trends could make hiring for warehouse and distribution center employees difficult and expensive for the upcoming holiday season and in the longer term:

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How to Select the Best 3PL Vendor for Your Business

Many companies make strategic and cost-effective use of third-party logistics (3PL) to provide fulfillment and distribution for all or part of their business’ needs. At the heart of this transition is finding a long-term partner that meets the following six criteria:

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20 Critical Implementation Tasks When Moving Your Business to a 3PL

Using third party fulfillment (3PL) partners for fulfillment can provide tremendous benefits for your multichannel and e-commerce business. One way some companies use 3PL is as an additional warehouse in their distribution network. A strategically located warehouse can reduces ship time to customer as well as shipping costs.

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15 Considerations in Warehouse Space Planning

During the last recession, new warehouses were not built on a speculative basis. Once the market began to rebound, construction of new buildings could not keep up with the consumption of available space. As a consequence, the nationwide warehouse occupancy rate in most markets is at an all-time high in the mid-90%s.

Defining your company’s warehouse and distribution requirements involves some forward planning. Not only do you have to accurately plan your current space needs but find a potential facility that meets a high percent of your requirements needed for growth. If suitable buildings are not available, then a longer-term strategy of build-to-suit (BTS) is necessary. Regardless of which option (lease, purchase, or BTS), identifying the detailed space requirements is the crucial first step before touring buildings.

Here is a 15 point checklist to help you identify your current space use and future growth requirements:

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