Businesses may celebrate excellent on-time delivery and perfect order rates, only to discover their shipping cost per order is quietly eroding profit margins. While speed and accuracy grab attention in executive dashboards, cost efficiency determines whether your supply chain is a competitive advantage or a profit drain.
This is the fourth metric in our Shipping Metrics That Matter series, where we explore the key performance indicators that drive supply chain success. Previously, we covered On-Time Delivery (OTD), Order Cycle Time, and Perfect Order Rate. Now we're examining the metric that reveals whether your operational excellence translates to financial sustainability.
Shipping Cost Per Order = Total Shipping Costs ÷ Total Number of Orders
This metric captures the true cost of moving orders from ready-to-ship to customer delivery. Unlike basic freight spend tracking, Shipping Cost Per Order includes the full spectrum of shipping-related expenses.
Total shipping costs encompass carrier charges, warehouse labor, packaging materials, returns processing, customer service calls related to shipping issues, additional costs like address corrections or redelivery fees. They may also include costs like technology investments, insurance, and expedited freight charge – highlighting that shipping costs extend far beyond basic carrier rates.
While individual shipping decisions seem small, they compound rapidly across thousands of orders. For example, a $2 increase in average shipping cost per order translates to $200,000 in additional annual expense for a company processing 100,000 orders. Common costs drivers include:
The Service vs. Cost Balance
The challenge is optimizing cost, speed, and reliability. Companies that reduce shipping spend without considering service impact often face:
Leading logistics teams use Shipping Cost Per Order to identify efficiency opportunities that maintain or improve service quality while reducing expenses.
A strong shipping cost analysis framework helps business move beyond surface-level freight spend and uncover the real cost drivers within fulfillment operations. The goal is to connect cost visibility with decision-making so you can reduce expenses without sacrificing service.
A useful framework typically focuses on three priorities:
Many organizations underestimate their true shipping costs by focusing only on carrier invoices. A complete analysis should capture all related expenses—including labor, packaging, reverse logistics, technology, and overhead—so you see the full financial picture.
Looking at an average cost per order only tells part of the story. Breaking down costs by order type, service level, channel, or customer segment helps identify patterns that inflate expenses. For example, low-value orders with expedited delivery often carry disproportionate costs compared to their revenue contribution.
Tracking how shipping cost per order shifts over time is critical. Seasonal peaks, carrier rate increases, or changes in product mix can erode margins quickly. Benchmarking your costs against industry peers or historical performance highlights where corrective action is needed.
By combining full cost visibility, meaningful segmentation, and ongoing monitoring, logistics leaders create a data-driven foundation for optimizing shipping cost per order. The infographic above illustrates how these principles can be applied across direct and indirect costs, order characteristics, service levels, and channels.
ShipERP integrates directly within your SAP or Oracle ERP system to provide real-time rate shopping across 250+ carriers, enabling automatic selection of the most cost-effective shipping option for each order while maintaining delivery commitments.
ShipERP Spotlight leverages AI and machine learning to analyze shipping data and identify cost-saving opportunities, providing businesses with actionable insights.
ShipERP Cloud delivers platform-agnostic shipping optimization that integrates seamlessly with any ERP system, providing the same cost optimization benefits through a flexible, scalable solution.
Shipping Cost Per Order reveals the true economics of your fulfillment operations, showing whether operational improvements translate to financial benefits. Unlike metrics that focus solely on speed or accuracy, this metric ensures your supply chain improvements contribute to business profitability by:
Companies that excel in balancing cost and service build supply chains that deliver long-term profitability.
Next in our series: Freight Audit Discrepancy Rate—Learn how to identify billing errors, recover overcharges, and ensure carrier invoice accuracy to protect your shipping budget.