How much does an order handled by hand cost?
An order looks like a small thing. The customer sends a message, you send the parcel, done. Follow it step by step, though, and you will see how many times it passes through someone’s hands. Here we go through those steps, then do a simple sum with your own numbers. You will need a piece of paper, a pen and a clock.
The short answer
Nobody can tell you the amount without knowing your business, and that includes us. You can work it out yourself, though: minutes per order × orders per month ÷ 60 × the cost of one hour. Add what mistakes cost you and you have the monthly bill.
The steps of one order
A usual route looks something like this. Yours may have more steps or fewer, so keep whatever applies to you.
- The order arrives. By email, phone, Viber or through your online shop. Someone has to notice it.
- It gets written down. The details are copied into an Excel file, a notebook or a program.
- It gets checked. Is the product in stock? Is the price right? Is the address correct?
- You reply to the customer. You confirm you received it and say when it will arrive.
- You check the payment. You open your bank account and look for the transfer, or note that they will pay on delivery.
- You issue the receipt or invoice. The same details get typed again, this time into your invoicing program.
- You prepare the parcel. You collect the products, enter the address on the courier’s website and print the label.
- You update the customer. You send the tracking number so they can see where the parcel is.
- You answer “where is my order?”. Someone picks up the phone, looks it up and replies.
Notice how often the same things get written down. The name, the address and the amount may be typed three or four times. Every copy takes time, and every copy can bring a mistake with it.
The sum, with your own numbers
1. Measure the minutes
Time three to five normal orders from start to finish and take the average. Ask whoever actually handles them to do it, because guesses from memory are often wrong. Include the replies to customers.
2. Count the orders
How many did you have last month? If your business has seasons, take an average over several months.
3. Find the cost of one hour
For an employee, take what they cost you in total each month, including contributions, and divide by the hours they work. If you handle the orders yourself, use what you would pay someone to do them for you.
4. Count the mistakes
Wrong product, wrong address, a parcel that came back. How many happened this month? What did each one cost in shipping, product and time? A rough estimate is enough.
An invented example
The numbers in this example are invented. We use them only to show how the sum works. They don’t come from a real business and they don’t show what is normal.
| What we measure | Invented example |
|---|---|
| Minutes per order | 10 |
| Orders per month | 150 |
| Hours per month | 10 × 150 ÷ 60 = 25 hours |
| Cost of one hour | 12 euros |
| Cost of that time per month | 25 × 12 = 300 euros |
| Mistakes per month | 3 × 25 euros = 75 euros |
| Total per month | 375 euros |
| Total per year | 375 × 12 = 4,500 euros |
Now put your own numbers in the same rows. Your result may come out much smaller or much larger.
What the sum leaves out
Some things are hard to put a number on, but they are worth keeping in mind:
- The customer who is waiting. When a reply is slow, someone may buy elsewhere.
- The one person who knows everything. If they are away for a week, everything slows down.
- The good days. More orders mean more hours of typing, so your best days are also your most tiring ones.
- Your own time. Every hour spent on orders is an hour you don’t have for customers, suppliers or your home.
What to do with the number
If it comes out small, good. You can stay as you are and spend nothing. That is a useful answer too.
If it comes out large, see which step eats the most minutes and start there. Some of the time will always remain, because a person will still prepare the parcel. So when you compare with the cost of any program, count only the minutes that would really go away. For a real example, see a printing business for which we built a system.
The next step
If you would like a first picture without a stopwatch, take the 6-question check of where you lose time. If you would rather look at it together, book a free 30-minute call. Bring your number and we will give you a plan.