Cost per order line

How cost per order line is worked out

The sum is the total cost of the warehouse over a period, divided by the number of order lines shipped in that period. Everything turns on what you put in the top half.

Wages and agency hours are never in dispute. Rent, racking, trucks, packaging, warehouse software and the supervisors and planners usually belong there too, because they exist in order to get lines out. Carrier charges usually do not: freight attaches to a parcel or a pallet, not to a line, and dropping it into this figure means a customer who orders one heavy item looks expensive to pick. Inbound handling is a judgement call. Pick one definition, note it on the report, and change it only deliberately.

There is a cost per order line calculator on this site if you want to see what your own cost base does to the figure.

There is no good number

A builders' merchant sending full pallets and a vitamin shop sending single tubs will land nowhere near each other, and neither figure says who runs the better warehouse. Order size, product size, how much is stored and how often a line is touched all move it.

What the figure is good at is two comparisons. Against your own previous year, it shows whether the cost base is growing faster than the work. Across channels, it shows which part of the business is actually expensive to serve, which is often the part nobody suspected.

In practice

The warehouse costs £420,000 for the year: £285,000 in wages and agency, £95,000 in rent and equipment, £28,000 in packaging, £12,000 in software. It shipped 1.4 million lines. 420,000 divided by 1,400,000 is £0.30 a line.

The following year the same warehouse costs £441,000, five per cent more, and ships 1.68 million lines because the average order went from three lines to three and a half. 441,000 divided by 1,680,000 is £0.2625, a drop of more than ten per cent. Not one thing about the picking improved. This is why the figure is read alongside cost per order, which in this example went up. The numbers are an illustration.

What moves the figure

• Labour hours per line. This is the big one, and it is the same lever as picks per hour: shorter routes, better grouping, fast movers near the bench.
• Order profile. Lines per order, units per line, and how many orders are single-line. A shift towards larger orders flatters the figure; a shift towards singles punishes it.
• Packaging decisions. Box size, void fill and whether a packer chooses or the system chooses. Packaging is often the second largest variable cost after labour.
• Double handling. Every put-away into a reserve location that is later moved to a pick face is paid for twice and shows up here.
• Peak staffing. Agency premium and the learning curve of temporary staff concentrate in a few weeks and can move the annual figure on their own.
• What you count. More than one apparent improvement in this figure has turned out to be a quiet change in the cost definition. Keep the definition on the report.