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How to Calculate (and Reduce!) Your Fulfilment Cost Per Order

a retail warehouse

The average fulfilment cost per order in the UK has surged by 15% over the past three years, driven by rising labour expenses, supply chain disruptions, and heightened customer expectations for faster delivery. For warehouses and logistics firms, controlling these costs isn’t just beneficial—it’s essential for staying competitive.

Below, we’ll break down how to calculate your fulfilment cost per order (FCPO), identify hidden expenses draining your budget, and implement actionable strategies to reduce overheads without compromising efficiency.


a warehouse picker

Understanding Fulfilment Cost Per Order

Fulfilment cost per order (FCPO) is the total expense incurred to process, pack, and ship a single customer order. It’s a critical metric for warehouses and logistics companies, as it directly impacts profitability, pricing strategies, and operational scalability.

Key Components of Fulfilment Costs

FCPO isn’t just about postage fees. It encompasses every cost involved in turning an order into a delivered parcel:

  • Storage costs: Rent, utilities, and equipment for housing inventory.
  • Labour costs: Wages for picking, packing, labelling, and dispatching orders.
  • Shipping costs: Carrier fees, fuel surcharges, and expedited delivery upgrades.
  • Packaging costs: Boxes, tape, bubble wrap, and void fill.
  • Returns processing: Handling, restocking, and disposal of returned items.
  • Overheads: Warehouse management software (WMS), maintenance, and insurance.

The Formula:

Fulfilment Cost Per Order (FCPO) = Total Fulfilment Costs ÷ Number of Orders Processed


How to Calculate Your Fulfilment Cost Per Order

Accurate calculation requires meticulous tracking of all expenses over a specific period (e.g., monthly or quarterly). Here’s how to do it:

Step 1: Gather Your Data

Compile data from financial records, WMS reports, and carrier invoices. Focus on:

  • Total labour hours spent on fulfilment tasks.
  • Warehouse occupancy costs (per square metre).
  • Packaging material spend.
  • Shipping carrier fees and surcharges.
  • Returns processing costs.

Pro Tip: Use granular analytics tools to auto-categorise expenses—this reduces manual errors.

Step 2: Categorise and Sum Fulfilment Costs

Group expenses into the six categories above. For example:

  • Labour: £12,000 (600 hours at £20/hour)
  • Storage: £8,000 (rent + utilities)
  • Shipping: £15,000 (carrier fees)
  • Packaging: £3,000
  • Returns: £2,000
  • Overheads: £5,000

Total Fulfilment Costs = £45,000

Step 3: Divide by Total Orders Processed

If you shipped 9,000 orders in the same period:

FCPO = £45,000 ÷ 9,000 = £5.00 per order

Benchmarking: Compare your FCPO to industry averages (£4.50–£6.50 per order for SMEs) to gauge performance.


cross docking in place in a warehouse

6 Strategies to Reduce Your Fulfilment Cost Per Order

Lowering FCPO requires optimising workflows, renegotiating contracts, and eliminating waste. Here’s where to start:

1. Optimise Storage Layout and Space Utilisation

Inefficient storage wastes time and money. Tackle this by:

  • Adopting vertical storage solutions to maximise cube space.
  • Reorganising inventory based on pick frequency (e.g., fast-moving items near packing stations).
  • Using modular, collapsible storage systems like PALLITE’s PIX® Shelf, which can be reconfigured as needs change, reducing wasted space by up to 40%.

Impact: A 20% boost in storage efficiency can lower overheads by £1,600/month in a £8,000 storage budget.

2. Streamline Labour Efficiency

Labour accounts for 30–50% of fulfilment costs. Improve productivity through:

  • Batch picking: Grouping orders by location to reduce travel time.
  • Investing in training to reduce errors and speed up processing.
  • Implementing ergonomic tools (e.g., adjustable workstations, mobile packing carts).

Case Study: A Midlands-based 3PL reduced picking time by 25% after switching to zone-based workflows, saving £180,000 annually.

3. Renegotiate Shipping Contracts

Carrier fees are negotiable. Leverage data to secure better rates:

  • Audit shipping invoices for overcharges or dimensional weight discrepancies.
  • Consolidate shipments with fewer carriers to increase bargaining power.
  • Offer tiered delivery options (e.g., standard, express) to balance cost and customer demand.

4. Reduce Packaging Costs

Right-size packaging to cut material spend and shipping fees:

  • Use scalable box sizes to minimise void fill and dimensional weight charges.
  • Switch to lightweight, recyclable materials like PALLITE’s honeycomb packaging, which is 40% lighter than cardboard and reduces shipping costs.
  • Invest in automated packaging machines for high-volume operations.

Bonus: Sustainable packaging can lower costs and attract eco-conscious customers.

5. Minimise Returns Processing Expenses

Returns cost UK retailers £60 billion annually. Mitigate losses by:

  • Improving product descriptions to reduce “wrong item” returns.
  • Automating returns authorisation to filter out fraudulent claims.
  • Reselling open-box items via outlet channels instead of restocking.

6. Leverage Technology for Smarter Operations

Automation and data analytics are game-changers:

  • Warehouse management systems (WMS): Automate inventory tracking and order routing.
  • AI demand forecasting: Reduce overstocking and stockouts.
  • Robotic process automation (RPA): Handle repetitive tasks like label printing.

The Bottom Line: Small Changes Add Up

Reducing FCPO isn’t about sweeping overhauls—it’s about identifying inefficiencies and making incremental improvements. For instance:

  • A 10% reduction in labour and storage costs could lower a £5.00 FCPO to £4.50.
  • Negotiating a 7% shipping discount could save £1,050/month on a £15,000 spend.

warehouse storage solutions

Ready to Slash Your Fulfilment Costs? Partner with PALLITE

At PALLITE, we design innovative, sustainable storage and packaging solutions that help warehouses and logistics companies:

  • Maximise storage space with modular, collapsible shelving and partitions.
  • Reduce packaging spend with lightweight, compostable materials.
  • Cut labour time via ergonomic, easy-to-assemble designs.

Our clients typically see a 22% reduction in storage costs and a 15% boost in picking efficiency within six months.

👉 Take Action Today


Contact PALLITE’s team to book a free consultation. Discover how our bespoke solutions can streamline your operations, lower your FCPO, and future-proof your business.

📞 Call +44 (0)1933 283920 | 📧 enquiries@pallitegroup.com | 🌐https://pallitegroup.com/


Final Thought: In an era where customers expect faster, cheaper delivery, mastering your fulfilment cost per order isn’t optional anymore—it’s the key to market survival. Start auditing, optimising, and innovating today.

Customer Case Studies

WE HELP COMPANIES IMPROVE THEIR PICK EFFICIENCES, REDUCE WALK SEQUENCES AND INCREASE THEIR ROI. LET’S TALK TO SEE HOW WE CAN SUPPORT YOUR BUSINESS.

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