Inventory glossary
What is Cost per order?
Cost per order is the total expense a store incurs each time it places a purchase order with a supplier, including admin time, shipping, and any handling fees, divided by the number of orders.
Knowing your cost per order helps you decide how often to reorder. If placing an order costs very little, you can order small batches frequently. If it costs a lot in staff time or freight minimums, it makes sense to order larger quantities less often and hold more stock.
Small store owners often ignore this cost because no invoice says "ordering cost." But time spent emailing suppliers, chasing confirmations, and checking in deliveries adds up. Tracking it, even roughly, helps you set smarter reorder quantities instead of guessing.
Formula
Example
A candle store spends 2 hours per order on admin at $20 an hour, plus a flat $15 shipping fee per order from its wax supplier. That is $40 + $15 = $55 per order. If the store places 12 orders a year, total ordering cost is $660 a year, or $55 per order.
Common mistakes
- Counting only the supplier invoice and ignoring staff time spent preparing and following up on orders.
- Using a national average instead of your own numbers, which vary by supplier and process.
- Forgetting to update the figure when a supplier changes shipping terms or minimum order rules.
Cost per order and SteadyShelf
SteadyShelf drafts and sends purchase orders automatically, which cuts the admin time that makes up most of your cost per order.
SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.
Related terms
Economic order quantity · Reorder quantity · Purchase order · Order cycle · Holding cost
FAQ
Why does cost per order matter for a small store?
It affects how often you should reorder. High ordering costs push you toward fewer, larger orders. Low ordering costs let you order smaller amounts more often without wasting money on admin or shipping.
Does cost per order include the price of the goods themselves?
No. It only covers the cost of placing and processing the order, such as admin time, shipping fees, and handling. The cost of the inventory itself is tracked separately.
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