In today's highly competitive e-commerce market, understanding your business's average fulfillment cost per order is essential to managing your bottom line. Not only does it help you make informed decisions about pricing and shipping, but it also provides valuable insight into areas where you can reduce expenses and improve efficiency. Even a small reduction in your fulfillment cost per order can have a major impact on your profit. Let’s explore how to calculate your fulfillment cost per order and how Automation Storage and Retrieval Systems (ASRS) can help reduce it.
How to Calculate Fulfillment Cost Per Order
Calculating your fulfillment cost per order requires taking into account various expenses associated with picking, packing, and shipping products to customers. To find your average fulfillment cost per order, follow these steps:
1. Calculate your total fulfillment expenses: These include costs for labor, packaging materials, shipping fees, and any additional fees associated with the fulfillment process. Be sure to include expenses like warehouse rent and utility bills.
2. Determine your total number of orders: Look at your sales data and determine the total number of orders fulfilled during a specific time frame, such as a month or a year.
3. Divide total expenses by the number of orders: To find your average fulfillment cost per order, simply divide the total fulfillment expenses by the total number of orders. This will give you the average cost to fulfill a single order.
Average Fulfillment Cost Per Order =
Total Fulfillment Expenses / Total Number of Orders
Reducing Fulfillment Cost Per Order with ASRS
One of the most effective ways to reduce your fulfillment cost per order is by automating your warehouse operations. Automated Storage and Retrieval Systems (ASRS) can help you achieve this goal by significantly reducing labor costs and increasing overall efficiency. Here's how ASRS can help:
1. Reduced labor costs: One of the most significant benefits of ASRS is its potential to cut labor expenses. Traditional warehouses often require multiple staff members walking and searching through shelving to pick, pack, and ship orders. ASRS solutions deliver the goods directly to the operator, eliminating the time spent walking and searching to dramatically improving labor efficiency. As labor costs tend to be one of the most considerable expenses associated with order fulfillment, implementing ASRS can reduce the amount of labor required and have a substantial impact on your bottom line.
2. Improved efficiency: ASRS can help you optimize your warehouse space and reduce the time it takes to fulfill an order. By using advanced algorithms, ASRS can determine the best storage locations for items and the most efficient routes for picking orders. This streamlined process results in faster order processing, which can lead to higher customer satisfaction and reduced fulfillment costs per order.
3. Inventory & order accuracy: ASRS can track and manage your inventory and order fulfillment process with a high level of precision. This ensures that your stock levels are accurate (reducing manual inventory checks and eliminating stockouts) and your orders are correct (increasing customer satisfaction).
4. Scalability: ASRS can easily adapt to changes in order volume common with e-commerce fulfillment, allowing your warehouse to grow and shrink as needed. This flexibility means you can maintain optimal efficiency without worrying about the costs of scaling up or down.
Cost Savings Calculator
To see just how much you can save by implementing ASRS in your warehouse operations, use our automation cost justification calculator. By inputting relevant information about your current fulfillment costs, the calculator will provide an estimate of potential cost savings you can achieve with automation.
Understanding your fulfillment cost per order is critical to ensuring the success of your e-commerce business and maintaining a competitive edge in the e-commerce landscape. By calculating these costs and identifying opportunities for improvement, you can make informed decisions to optimize your operations. Leveraging automation technologies like ASRS, is one way you can streamline your operations, reduce labor costs, and increase overall efficiency. Use our automation cost justification calculator to estimate the potential savings for your business and take the first step towards a more efficient and cost-effective fulfillment process.