Skip to main content

Methodology

Fulfilment Cost Comparison Planner methodology

This planner compares two user-entered fulfilment cost contracts at one monthly order volume and identifies a positive fixed/variable crossover where one exists.
Duc Nguyen X.By Duc Nguyen X.ยท Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Loaded labour per order
L = t รท 60 ร— w

Where

t, w
labour minutes per order and loaded hourly labour cost (minutes/order and currency units/hour ex indirect tax)Source: Business record
L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Variable cost per order
V = p + k + s + o + L

Where

p, k, s, o
pick/pack, packaging, shipping and other variable cost (currency units/order ex indirect tax)Source: Business record
L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Monthly option cost
C = F + N ร— V

Where

N
orders in the compared month (orders/month)Source: Business record
F
monthly fixed fulfilment cost (currency units/month ex indirect tax)Source: Business record
L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Effective cost per order
E = C รท N

Where

N
orders in the compared month (orders/month)Source: Business record
L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Candidate cost difference
ฮ” = Cc โˆ’ Cb

Where

L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Vb, Vc, Cb, Cc
baseline and candidate variable and monthly cost values (currency units/order or currency units/month ex indirect tax)Source: Calculated output
Positive crossover volume
Nx = (Fc โˆ’ Fb) รท (Vb โˆ’ Vc)

Where

Fb, Fc
baseline and candidate monthly fixed fulfilment costs (currency units/month ex indirect tax)Source: Business record
L, V, C, E, ฮ”, Nx
calculated labour, variable, monthly, effective, difference and crossover values (currency units/order, currency units/month or orders/month)Source: Calculated output
Vb, Vc, Cb, Cc
baseline and candidate variable and monthly cost values (currency units/order or currency units/month ex indirect tax)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The illustrative fixture below is calculated by the engine from user-style assumptions. It is not a provider quote or market benchmark.

Calculation and outputs

Example

The illustrative fixture below is calculated by the engine from user-style assumptions. It is not a provider quote or market benchmark.

Self-fulfilment variable cost per order
17.00 currency units
Third-party variable cost per order
12.58 currency units
Self-fulfilment monthly cost
8,600.00 currency units
Third-party monthly cost
6,841.67 currency units
Positive crossover volume
101.89 orders/month

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Use the entered-volume result to compare cost, while keeping service level, control and switching risk as separate decisions.

3. Validation and boundary checks

  • Fixed and variable costs remain separate, so loaded labour is included exactly once.
  • Equal variable-cost slopes return no finite crossover instead of Infinity.
  • A negative or zero algebraic crossover is reported as no positive crossover.

4. Assumptions and source classification

  • Both options use the same monthly volume and a comparable representative order mix.
  • Every amount is entered from the sellerโ€™s records or quote and excludes indirect tax.
  • The loaded labour rate represents business cost, not a customer billing rate.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The model excludes service levels, delivery performance, errors, systems, onboarding, exit terms and customer experience.
  • It does not model provider tiers automatically or recommend a provider.
  • It is educational scenario planning, not accounting, tax, logistics or commercial advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Related reading

Guides to interpret the decision and its assumptions.

Return to the planner