A metric that calculates the average cost to process and fulfil a single order, including labour, packaging, shipping, and overheads. Tracking CPO helps warehouses and fulfilment centres optimise operations, control expenses, and improve profitability per order.

Cost per Order (CPO) is a metric that calculates the average cost to process and fulfil a single order, including labour, packaging, shipping, and overheads. Tracking CPO helps warehouses and fulfilment centres optimise operations, control expenses, and improve profitability per order.

It's the number that tells you whether you're actually making money on each order.

Why CPO Matters

You might have impressive order volumes and healthy revenue, but if it costs you £12 to fulfil an order where you only make £8 margin, you're losing £4 on every single order; scale that across thousands of orders, and you're burning cash.

CPO reveals the true cost of fulfilment. It helps you price services appropriately, identify inefficiencies, and make informed decisions about automation, staffing, and processes.

For 3PLs, CPO determines whether client contracts are profitable. For eCommerce retailers, it shows whether free shipping offers are sustainable or destroying margins.

Components of CPO

Labour costs:

• Picking time

• Packing time

• Quality checking

• Returns processing

• Supervision and management allocation

Packaging materials:

• Boxes and mailers

• Protective materials (bubble wrap, paper)

• Tape and labels

• Branded inserts

Shipping costs:

• Carrier fees

• Fuel surcharges

• Insurance

• Returns logistics

Technology and equipment:

• WMS subscription costs

• Scanning equipment depreciation

• Printer consumables

• Maintenance

Overheads:

• Warehouse rent (allocated per order)

• Utilities

• Equipment depreciation

• Administrative support

Calculating CPO

Basic Formula: CPO = Total Fulfilment Costs ÷ Number of Orders

Example: Monthly costs:

• Labour: £45,000

• Packaging: £8,000

• Shipping: £32,000

• Technology: £3,000

• Overheads: £12,000

• Total: £100,000

Orders fulfilled: 8,000

CPO = £100,000 ÷ 8,000 = £12.50 per order

This tells you the average cost, but remember, not all orders are equal. A single-item order costs less to fulfil than a 10-item order. Segment CPO by order type for better insights.

Why CPO Varies

Order complexity: Multi-item orders take longer to pick and pack than single items.

Product characteristics: Fragile items require more careful handling and packaging. Bulky items need larger boxes and more materials.

Accuracy issues: Errors create repicks, returns processing, and customer service costs; all increase CPO.

Seasonal fluctuations: Peak periods with temporary staff often have higher CPO due to lower productivity during training.

Volume: Fixed costs spread across more orders reduce CPO. Fulfilling 10,000 orders versus 5,000 with similar fixed costs halves the overhead allocation per order.

Reducing CPO

Improve labour productivity: Faster picking and packing directly reduces labour cost per order. Optimise warehouse layout, implement proper training, and use efficient workflows.

Increase pick accuracy: Every error costs money. Repicks, returns processing, and customer service all inflate CPO. Get it right the first time.

Optimise packaging: Right-size boxes to reduce material costs and shipping fees. Eliminate unnecessary packaging whilst maintaining product protection.

Negotiate better carrier rates: Volume discounts, consolidated shipping, and competitive carrier selection reduce shipping costs per order.

Implement WMS: Automation reduces labour time per order through optimised pick paths, automated label generation, and streamlined workflows.

Batch processing: Batch picking multiple orders simultaneously reduces travel time and labour cost per order.

Increase order volume: Fixed costs like rent and technology spread across more orders naturally reduce CPO. Growth improves unit economics.

Technology's Role

Modern warehouse management systems track CPO automatically by capturing:

Time-on-task data: Exact labour hours per order type.

Material usage: Packaging consumption per order.

Shipping costs: Actual carrier charges per shipment.

Overhead allocation: Automated distribution of fixed costs across order volume.

This data enables precise CPO calculation and identifies which order types, products, or customers are most profitable.

CPO and Pricing Decisions

Understanding CPO helps you price intelligently.

For 3PLs: If CPO is £8.50, you can't profitably charge clients £7 per order; price services are based on actual costs plus the desired margin.

For eCommerce retailers: If CPO is £10 and free shipping is offered on all orders, that cost must be absorbed in product margins. An order with an £8 margin loses £2 before considering other expenses.

Minimum order values: Setting minimums for free shipping ensures CPO doesn't exceed margin on small orders.

Benchmarking CPO

Industry averages vary significantly:

• Small eCommerce (manual processes): £8-15 per order

• Medium operations (some automation): £6-10 per order

• Large automated facilities: £4-7 per order

• 3PL operations: £5-12 per order ,depending on services

Your CPO depends on product type, order complexity, volume, and automation level. Compare against your own historical performance, not just industry averages.

Getting Started

1. Calculate current CPO – Gather all fulfilment costs for one month.

2. Segment by order type – Single-item vs multi-item, product category, size.

3. Identify cost drivers – Which components inflate CPO the most?

4. Set reduction targets – Realistic goals based on efficiency improvements.

5. Implement changes – Focus on the highest-impact cost reduction opportunities.

6. Track progress – Monthly CPO monitoring shows improvement trends.

CPO connects operational efficiency to financial performance. Reduce it through better processes, and profit increases. Ignore it; you might be growing revenue while losing money on every order.