What is the Fully Burdened Cost per Shipment?

A massive mistake made by direct-to-consumer (DTC) and e-commerce companies is assuming their "Cost Per Shipment" is simply the $7.50 they pay to UPS for a shipping label. In reality, that box did not magically pack itself.

The Fully Burdened Cost per Shipment measures the true logistical cost of getting a product out the door. It aggregates the carrier postage, the cost of the cardboard box, the cost of the thermal label, and the hourly wage of the warehouse worker who picked and packed the order.

Why Fulfillment Labor Matters

If you pay a warehouse worker $20/hour, and they can pick and pack 40 boxes an hour, your labor cost per shipment is $0.50. However, if your warehouse is disorganized, and they spend 15 minutes searching for a single item, they can only pack 4 boxes an hour. Your labor cost per shipment just skyrocketed to $5.00 per order.

Fulfillment Cost as a Percentage of AOV

Your Average Order Value (AOV) dictates whether or not your business model is sustainable. If your fully burdened cost per shipment is $10.00, and your AOV is $150, fulfillment is eating a very healthy 6.6% of your revenue. But if your AOV is only $25, that exact same $10 box is consuming a catastrophic 40% of your revenue.

How to Improve This Metric

• Increase AOV: Force customers to buy more by increasing your "Free Shipping" minimum threshold from $50 to $75. This allows you to spread the high fixed cost of a shipment across a larger revenue base.
• Optimize Warehouse Layout: Implement an efficient pick-path and barcode scanning system to increase the number of orders a worker can pack per hour, driving down the unit labor cost.
• Right-Size Packaging: Don't ship a tiny item in a huge box filled with expensive bubble wrap. It costs more in materials, and triggers higher volumetric carrier fees.