In business, many budgetary factors need to consider and one major cost of new e-commerce business owners that can make or break your business is the cost of shipping and fulfillment.
Shipping is a key part of your business. It’s the point where a customer finally experiences your product in person, and it can also represent a major expense in your business, depending on your shipping strategy. That’s why it’s so important to map out a defined shipping strategy.
Shipping refers to the sum of the cost of postage and transportation to get the package from the shipping carrier to the end consumer. This fee includes surcharges, fuel charges, and other costs related to the distance traveled and delivery timeline chosen.
Fulfillment cost per order (CPO) is the sum of the cost of the warehouse/storage area involved, including receiving, putting away, and storing the product. Plus the labor requirement for moving the object fulfilling orders through picking, packing, and shipping. In short, the fulfillment cost is the storage cost+ the labor and machinery cost+ the cost of storing.
You need to have an idea of the number of products you will sell. And according to that the cost of shipping can be calculated for each product. Then, you need to add the fulfillment cost to it. And if any defective product is found then the cost to replace or repair needs to be added. This also includes customer service cost and the shipping cost of raw materials from the supplier.
Your business budget can be done with a little bit of math and planning and you will get your accurate calculation of shipping and fulfillment expenses.
Click below to know more about how to estimate realistic e-commerce shipping and fulfillment:
Calculating your total CPO(cost per order) gives you a much broader understanding of the major fulfillment costs. Because a major portion of CPO is fixed costs, it challenges to maximize the productivity of labor, which is something every fulfillment manager can do something about.
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Contributor: Riti Gupta
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