Managing and Computing Order Handling Charges: A Guide
Managing handling fees is a crucial aspect of running an apparel business, especially in the e-commerce space. Best practices include calculating costs accurately, maintaining transparency with customers, and adopting a lean approach to warehouse management.
To calculate handling fees efficiently, it's essential to analyze all related costs such as pick & pack, storage, shipping, and order processing. The cost per order can be determined by dividing the total fulfillment costs by the total orders processed. This figure reflects the fee needed to cover actual handling costs.
Apparel handling fees tend to be slightly higher than non-apparel due to dimensions and material, typically costing an additional $0.30 to $0.50 per order on platforms like Amazon. Include all relevant components in the fee calculation, including pick & pack fees, storage costs, shipping costs, and any additional handling or special packaging surcharges.
Furthermore, it's vital to factor in cost coverage by ensuring fees cover direct costs like labor and materials, indirect costs such as warehousing, insurance, and system costs, and margins or buffers for returns, damages, and other exceptions.
Regularly review and update handling fees based on actual fulfillment costs and changing variables. Segment handling fees by product category or order complexity, with apparel requiring extra steps like folding and tagging warranting higher fees. Negotiate with 3PL providers and choose partners with transparent pricing and reliable, efficient order fulfillment.
Utilize software solutions like Extensiv Order Manager or inventory and order management platforms to automate Cost of Goods Sold (COGS) and related fee tracking, integrating costs like handling and storage into profitability calculations. Many 3PL providers offer proprietary dashboards and tools to monitor fees, order status, and optimize warehouse operations.
Offer customers shipping and handling choices, including standard and expedited options. Regularly review and adjust handling fees to reflect current costs. Transparently incorporating handling fees can foster trust and loyalty among customers. Benchmark handling fees against industry standards to position them competitively.
Remember, handling fees are charged to customers in addition to their order subtotal and shipping costs. Focus on packaging efficiency to reduce costs and environmental impact while improving the customer unboxing experience. Utilize a service like Uphance to automate handling fee calculations, manage shipments, process returns, and handle invoices.
Lastly, it's important to communicate the value handled by handling fees to reinforce the benefits of choosing your brand. This includes the costs associated with processing customer orders from receipt to shipment, including labor, packaging, warehousing, and overhead costs. By following these best practices, businesses can maintain profitability while providing good customer service.
In the apparel industry, it's crucial to determine handling fees that not only cover the actual costs like labor and materials, but also indirect costs such as warehousing, insurance, and system costs, as well as margins for returns and damages. This can be achieved by analyzing all related costs and segmenting handling fees by product category or order complexity, with apparel requiring additional steps warranting higher fees.
To remain competitive, it's essential to benchmark handling fees against industry standards, utilizing software solutions or 3PL providers with transparent pricing and reliable, efficient order fulfillment, such as Extensiv Order Manager or Uphance, to automate handling fee calculations, manage shipments, process returns, and handle invoices.
