Fulfillment costs are made up of six items: goods receipt, storage, Pick & Pack, packaging, shipping and returns. To calculate them, assign your monthly volumes to each item and divide the total by the number of your orders. This gives you the fulfillment costs per order, which you can compare with your average order value and margin.
What fulfillment costs are made up of
Fulfillment covers all steps between the arrival of the goods in the warehouse and delivery to the customer, including returns. Providers usually charge for these steps individually. At first glance, this makes offers hard to compare, but it allows precise calculation.
The items can be grouped into three categories:
- Per delivery: goods receipt.
- Per month and volume: storage.
- Per order: Pick & Pack, packaging, shipping and returns.
In addition, some providers charge setup fees, monthly base fees or minimum revenues. Always ask about these explicitly, because these items are often not included in the price list.
Goods receipt
During goods receipt, your delivery is accepted, counted, checked for damage and put into storage. Depending on the provider, this is charged per pallet, per carton, per item or by time spent.
The costs depend heavily on how your goods arrive. Single-SKU pallets with clearly labeled cartons are recorded quickly. Mixed cartons, missing barcodes or loose-loaded containers mean more work. Typical additional services are:
- Labeling items without a barcode
- Quality control as a random sample or in full
- Unloading loose goods from the container
- Repacking into storable units
Agree on fixed packaging and labeling specifications with your suppliers. This reduces costs with every delivery.
Storage
Storage costs are usually charged monthly, depending on the goods per pallet space, shelf compartment, bin or cubic meter. A Euro pallet has a footprint of 120 × 80 cm. How many pallet spaces your goods need depends on quantity, dimensions and stackability. Read more about this in our article on Euro pallet dimensions.
You control storage costs mainly through your stock levels:
- Reorder slow-moving items in smaller quantities.
- Clear out shelf warmers regularly.
- Plan seasonal goods so that they do not sit in the warehouse for months.
To calculate per order, divide the monthly storage costs by the number of orders in the same month.
Pick & Pack and packaging
Pick & Pack refers to picking the ordered items and packing the shipment. The usual model is a price per order that includes the first item, plus a surcharge for each additional item. That is why the average number of items per order matters for your calculation.
Packaging material, meaning cartons, mailer bags, filling material and tape, is sometimes included in the Pick & Pack price and sometimes charged separately. Check this in every offer. Additional costs arise, for example, from:
- Gift or branded packaging
- Inserts such as flyers, invoices or samples
- Special protection for fragile goods
- Recording serial numbers or batches
Shipping and returns
Shipping
Shipping costs are often the largest single item. They depend on weight, parcel size, destination country and carrier. Larger parcels cost more even if they are light, because many rates take volume into account. Therefore, choose packaging that is as small as possible. Bulky goods and pallets are sent by freight forwarder and have their own rates.
When shipping abroad, costs rise significantly depending on the destination country. Outside the EU, customs declarations, import duties in the destination country and additional documents are added. Therefore, calculate international shipments separately and weight them by their share of all orders.
Returns
Returns incur costs for return shipping, acceptance, inspection and restocking, and for damaged goods also for refurbishment or disposal. To calculate per order, multiply the cost per return by your return rate. You determine the rate from your own figures: divide the number of returns in a period by the number of orders in the same period. Use several months for this, because the rate often fluctuates strongly after promotions and during the season. Also clarify who pays for return shipping, you or your customers, and whether the provider charges for return shipping itself or whether you use your own rate for it. How to reduce the rate is covered in our article on returns management.
Worked example: fulfillment costs per order
The following figures are freely chosen. They only illustrate the calculation and are neither market prices nor FulFra prices.
Example: A home accessories store ships 1,500 orders per month. An order contains 2 items on average. The stock occupies 40 pallet spaces. Once a month, 10 pallets of new goods arrive. The return rate is 8 percent.
- Goods receipt: 10 pallets × €8.00 = €80 per month, per order 80 ÷ 1,500 = about €0.05.
- Storage: 40 pallet spaces × €15.00 = €600 per month, per order 600 ÷ 1,500 = €0.40.
- Pick & Pack: €1.80 per order including the first item plus €0.30 for the second item = €2.10.
- Packaging: carton and filling material €0.50.
- Shipping: parcel within Germany €4.90.
- Returns: €6.00 per return for return shipping, inspection and restocking × 8 percent = €0.48 per order.
Total per order: 0.05 + 0.40 + 2.10 + 0.50 + 4.90 + 0.48 = €8.43. For the month, that comes to about €12,650.
With an average net basket value of €60, this corresponds to about 14 percent of revenue. Whether this is sustainable depends on your margin and on whether you pass shipping costs on to your customers.
What the example shows
- Shipping and Pick & Pack make up the largest share. This is where a careful comparison of offers pays off.
- Storage looks small per order, but it rises if stock grows while orders stay the same.
- The return rate changes the result directly. In industries with many returns, such as fashion, this item becomes significantly larger.
- More items per order reduce the cost per item, because shipping and the base price for Pick & Pack are only incurred once.
How to compare fulfillment offers
Offers are only comparable if all providers calculate with the same data. Therefore, compile the following in advance:
- Number of items (SKUs) with dimensions and weights
- Stock in pallets or cubic meters
- Orders per month, including seasonal peaks
- Average number of items per order
- Destination countries and share of international shipments
- Return rate
- Special requests such as inserts, gift wrapping or Amazon FBA Prep
Typical cost traps in offers
A low price for Pick & Pack says little if other items are high or missing. Pay particular attention to:
- Setup fees for integration, master data or putting away the initial stock
- Minimum revenues that are charged in full even in weak months
- Long minimum contract terms and notice periods that make a switch expensive
- Surcharges for bulky goods, multi-item orders or shipments after a certain time of day
- Billing of partial units, such as a full pallet space for a half-loaded pallet
- Costs at the end of the contract for removing and transporting your stock
Ask for an offer covering a complete sample month with your volumes. This way, you see all items together and can compare providers directly.
Whether a provider pays off compared with your own warehouse is described in our article 3PL or in-house logistics.
Fulfillment at FulFra
FulFra offers E-Commerce Fulfillment with goods receipt, storage, Pick & Pack, shipping and returns. Our own warehouse is located in Lehrte near Hannover. There are no setup fees, no minimum contract term and no minimum volumes, and the contract can be canceled monthly. You will find more about fulfillment costs at FulFra on the fulfillment costs page.
Frequently asked questions
How much does fulfillment cost per order?
That depends on the number of items per order, parcel size, destination country, stock levels and return rate. You can only get a reliable figure with an offer based on your own data.
Are shipping costs included in fulfillment costs?
This differs from provider to provider. Some list shipping separately, others include it in an overall price. When comparing, make sure you compare the same services.
How can I reduce my fulfillment costs?
The most important levers are suitable packaging sizes, lean stock levels, clean inbound deliveries and a lower return rate.
Does the FulFra price calculator calculate fulfillment costs?
No. The price calculator shows prices for transport, meaning parcels, groupage freight, pallets and full truckloads. For fulfillment, you receive an offer via the fulfillment request.
Would you like to plan your fulfillment costs with concrete figures? Send us your key data via the fulfillment request.