Fix the comparison boundary before calculating
Records and assumptions to align
- Use one SKU/basket, destination mix, period and shipped-order denominator. (not complete)
- Map platform inbound, storage, fulfilment, shipping, return and exception fees from current terms. (not complete)
- Map merchant space, software, packaging, loaded pick-pack labour, carrier and rework costs. (not complete)
- Allocate fixed costs by the same fulfilled-order volume and label spare capacity. (not complete)
- Record delivery promise, cut-off, inventory ownership and return-handling differences separately. (not complete)
| Field | Required unit | Preferred evidence |
|---|---|---|
| period fixed fulfilment costs | CU/period | current contract, lease or operating record |
| shipped orders | orders/period | merchant operations record or explicit scenario |
| expected exception cost | CU/shipped order | observed cohort or labelled sensitivity |
Build a reproducible scenario
cost per shipped order = (period fixed fulfilment costs ÷ shipped orders) + pick-pack + packaging + shipping + storage allocation + expected exception cost
- period fixed fulfilment costs
- Only fixed costs inside the chosen fulfilment boundary (CU/period) — current contract, lease or operating record
- shipped orders
- Completed outbound orders in the matched period (orders/period) — merchant operations record or explicit scenario
- expected exception cost
- Scenario frequency multiplied by cost for returns, rework or special handling (CU/shipped order) — observed cohort or labelled sensitivity
Do not use placed orders in one case and shipped orders in the other. Keep inventory funding, lost sales and service outcomes outside cost per order unless explicitly modelled.
Fictional 1,000-order monthly comparison
Both models serve the same 1,000 shipped orders. No platform or carrier rate is represented.
| Case | Declared inputs | Substitution | Result |
|---|---|---|---|
| Platform fulfilled | 600 fixed/inbound/storage; 4.80 pick-pack/shipping; 0.40 exceptions per order | 600 ÷ 1,000 + 4.80 + 0.40 | 5.80 CU/order |
| Merchant fulfilled | 2,200 space/software/labour capacity; 3.20 packaging/carrier; 0.30 exceptions | 2,200 ÷ 1,000 + 3.20 + 0.30 | 5.70 CU/order |
| Merchant at 700 orders | Same 2,200 fixed capacity and 3.50 variable/exception cost | 2,200 ÷ 700 + 3.50 | 6.64 CU/order |
Stress-test the uncertain inputs
| Variable | Lower case | Higher case | What it tests |
|---|---|---|---|
| Shipped-order volume | 700 orders | 1,300 orders | Tests fixed-cost absorption and capacity |
| Storage/inbound profile | Faster stock turn | Slower turn or aged stock | Tests platform/storage exposure |
| Exception frequency | Observed lower case | Peak or complex-order case | Tests rework and return handling |
Stop and review when
- Provider terms, market, currency or fee base are not current. (not complete)
- The models use different service promises, baskets or destination mixes. (not complete)
- Merchant capacity cannot meet the declared peak without an unpriced step cost. (not complete)
Turn the scenario into a controlled decision
- Reconcile the baseline to current records and name the evidence owner.
- Run the base case, then change one uncertain input at a time.
- Record the chosen response, approval limit, review date and stop trigger.
- Compare actual results with the original boundary before reusing the assumption.
Avoid these mistakes
- Comparing a provider fee with merchant postage while omitting loaded labour and space. (not complete)
- Ignoring inbound, storage, return and exception charges. (not complete)
- Treating volume as a forecast rather than a sensitivity. (not complete)
Questions to resolve before approval
- Is platform fulfilment the same as a third-party logistics provider?
- Not necessarily. Keep the exact contract and service boundary visible; platform fulfilment can include marketplace-specific inventory, eligibility and fee rules.
- Should inventory funding be included in cost per order?
- Show it separately unless the model explicitly includes dated inventory cash flows. A per-order expense view is not a cash-timing model.
Methodology and source boundary
- Fulfilment Cost Comparison methodology — Margin101: Product-owned fixed, variable, capacity and crossover boundary.
- Marketplace Fee Profit methodology — Margin101: Product-owned user-entered marketplace fee-stack boundary.
- Understanding fulfillment services — Shopify Help Center: Official provider terminology only; no rate, ranking or universal service claim is imported.