Pick and pack cost per order: how to work out yours

Your pick and pack cost per order is the labour it takes to get an order from the shelf into a labelled parcel ready to lodge. Work it out as minutes per order × loaded labour cost per minute, where the minutes include a fixed part for every order, an extra part for every item, and the paid time that isn't spent on orders at all. Most stores that time one order with a stopwatch undercount it, and the gap shows up as a shipping line that never quite covers itself.

This guide shows how to measure it properly, with a worked example you can copy.

What counts as pick and pack

Pick and pack is the labour in fulfilment. For a small store it usually covers:

• printing or opening the order and pick list
• walking to the stock and picking each item
• checking the items against the order
• choosing the box or satchel, packing and sealing it
• printing and sticking the label, and adding any insert
• getting the parcel to the lodgement point or pickup area

Keep packaging materials and postage out of this number. They're separate lines in your true shipping cost per order, and counting the box here as well as there is a common way to double-count.

Step 1: work out your loaded labour cost

The hourly rate you pay isn't what an hour of packing costs you. On top of the base wage there are on-costs: the super guarantee, leave (or casual loading), workers' compensation insurance and, for larger payrolls, payroll tax. The ATO's super for employers guidance covers your super obligations, and your bookkeeper or payroll provider can give you your real on-cost percentage.

Loaded hourly cost = base hourly rate × (1 + on-cost %)
Cost per minute    = loaded hourly cost ÷ 60

If you pack orders yourself, give your time an honest hourly value too. It isn't free just because nobody sends you a payslip. It's time you're not spending on buying, marketing or anything else.

Step 2: time orders, then split fixed and per-item time

Timing one order and calling it your average hides the most useful part of the number: bigger orders take longer, but not in proportion.

Time 15 to 20 ordinary orders from opening the order to the parcel sitting in the outgoing pile. Note how many items each one had. Then split the time into:

• fixed time per order: things you do once whatever is in the order, like printing, building the box, sealing and labelling
• time per item: finding, picking, checking and packing each extra item

A quick way to get the split: average the one-item orders to get roughly fixed time plus one item, then see how much longer the bigger orders took for each extra item.

Step 3: allow for time that isn't spent on orders

A stopwatch only measures the minutes someone is working on an order. Paid packing hours also include restocking the packing bench, clearing jams on the label printer, sorting parcels for lodgement, answering a "where's my order" question, redoing a mispick and waiting for the next batch.

Check this with a batch measure. Over a normal week:

Real minutes per order = total paid packing hours × 60 ÷ orders shipped
Utilisation            = stopwatch minutes per order ÷ real minutes per order

Utilisation tells you what share of paid packing time actually goes into orders. Divide your stopwatch times by it, and the fixed-plus-per-item model will add back up to your real wage bill.

Worked example: one store, three order sizes

Here's a made-up store packing in-house. All figures are illustrative and exclude GST. Swap in your own.

Labour cost. The packer's base rate is $30.00 an hour and on-costs add 20%:

Loaded hourly cost = $30.00 × 1.20 = $36.00
Cost per minute    = $36.00 ÷ 60  = $0.60

Stopwatch timing. Timing 20 orders gives 3.0 minutes fixed per order and 0.75 minutes for each item.

Batch check. Last week the store shipped 250 orders and paid for 22 hours of packing. Orders averaged 2.2 items.

Real minutes per order      = 22 × 60 ÷ 250        = 5.28 minutes
Stopwatch minutes per order = 3.0 + (0.75 × 2.2)   = 4.65 minutes
Utilisation                 = 4.65 ÷ 5.28          = about 88%

Costed on the stopwatch alone, the average order looks like 4.65 × $0.60 = $2.79. Costed on paid hours, it's 5.28 × $0.60 = $3.17. That's 38 cents an order the stopwatch misses.

Cost by order size. Now apply the model to each order size, dividing by 88% utilisation:

Order	Stopwatch minutes	÷ 0.88 = real minutes	× $0.60 = pick and pack cost
1 item	3.0 + 0.75 = 3.75	4.26	$2.56
3 items	3.0 + 2.25 = 5.25	5.97	$3.58
6 items	3.0 + 4.50 = 7.50	8.52	$5.11

The full formula, so you can drop it in a spreadsheet:

Pick and pack cost =
  (fixed minutes + per-item minutes × items) ÷ utilisation × cost per minute

Over a year. 22 hours a week × $36.00 × 52 weeks = $41,184 of packing labour. That's a real cost of selling, whether it sits in a wage line or in the owner's evenings.

What the number tells you about your shipping price

Three things usually fall out of this exercise.

One-item orders are where handling hurts most. The fixed 3 minutes are spent whether the order is $25 or $250. In the example, a one-item order still costs $2.56 to pick and pack before any postage or packaging. If those orders also pay low shipping, they're often the ones losing money. A dollar add-on or a minimum shipping price recovers that fixed cost better than a percentage markup on postage does.

Bigger orders cost more to pack, but less per item. The six-item order costs twice as much as the one-item order to pack ($5.11 vs $2.56), but carries six times the items. Those orders usually have the product margin to absorb handling, so there's rarely a need to charge per item for it.

Use the real figure, not the stopwatch. If you add handling to your shipping charge or your free-shipping maths, use the cost that adds up to your wage bill. In the example, using $2.79 instead of $3.17 would understate handling by about $95 a week across 250 orders (250 × $0.38).

Comparing in-house packing with a 3PL

A third-party logistics provider (3PL) typically prices pick and pack as a fee per order plus a fee per extra item, which maps neatly onto the fixed and per-item split above. That makes your own numbers easy to compare, as long as the comparison is like for like:

Your in-house cost	What to add to the 3PL quote
Loaded pick and pack cost per order (with utilisation)	Per-order and per-item pick fees
Packaging materials	Packaging, if they charge for it
Space for stock and packing	Storage fees
Your time receiving stock	Receiving or inbound fees
—	Monthly minimums, setup and freight to get stock to them

Then weigh what the freed hours are worth. If the owner is doing the packing, moving it out can be worth more than the dollar difference suggests. If the 3PL also quotes postage, compare that separately: it's a different line from pick and pack.

Ways to cut pick and pack time

The fixed minutes per order are usually the easiest to cut, because you repeat them on every order:

1. Batch the repeat tasks. Print all pick lists and labels in one go instead of order by order.
2. Sort pick lists by shelf location. Fewer steps per item adds up across hundreds of orders.
3. Keep fast sellers nearest the bench. The top handful of products is often most of what you pick.
4. Standardise packaging. A small set of box and satchel sizes, pre-built or within reach, beats hunting for the right one.
5. Pre-pack bundles and popular combos. Kitting during quiet times turns several picks into one.
6. Track mispicks. A redo costs a whole second order of handling plus postage, so a quick check before sealing often pays for itself.

Every half-minute saved per order is worth measuring. In the example, half a minute across 250 orders a week is about 6,500 minutes of paid time a year, or roughly $3,900 at $0.60 a minute.

Where TrkShp fits

TrkShp doesn't measure packing time; that's the spreadsheet above. What it does is quote live domestic Australia Post rates at Shopify checkout, with a global markup and optional minimum and maximum prices applied, so you can build the handling cost you've just measured into what customers pay. You can preview the prices checkout will return before you go live. A markup isn't profit until handling, packaging and the other costs are covered, so compare the preview with your full cost per order.

Key takeaways

• Pick and pack cost = (fixed minutes + per-item minutes × items) ÷ utilisation × loaded cost per minute.
• Use the loaded hourly cost, including on-costs, and give your own packing time an honest value.
• A stopwatch misses non-order time. Check it against paid packing hours ÷ orders shipped.
• Fixed time per order makes one-item orders the most expensive to handle relative to their value.
• Cut the fixed minutes first: batching, pick-list order and standard packaging help every order.

For how handling fits alongside postage and packaging in the profit on each order, see our guide to shipping profitability. To add a handling allowance to live Australia Post rates, the TrkShp setup docs explain the markup and minimum price settings.