Pick and Pack Cost Calculator

Setting it out

Pick and pack cost is labour time × fully loaded hourly cost, plus packaging materials. Labour time splits into a fixed component per order: travel to the pick face, packing, labelling, staging, and a variable component per line and per unit.

Written out: cost = (fixed minutes + lines × minutes per line) ÷ 60 × hourly rate + materials. The fixed component dominates for single-item orders, which is why the second item in a basket is so much cheaper than the first.

Worked through

A fully loaded warehouse rate of $26 an hour: wages plus employer taxes, holiday, supervision and shrinkage of productive time. Fixed handling of 3.5 minutes an order, plus 1.8 minutes per additional line.

A single-line order takes 5.3 minutes total: $2.30 of labour plus $0.95 of packaging is $3.25. Rounding the labour to the $2.40 used across this cluster covers the small variances.

A three-line order takes 3.5 + 5.4 = 8.9 minutes, $3.86 of labour, $1.25 of packaging, $5.11 total. That is 57% more cost for three times the goods, which is the entire economic argument for encouraging larger baskets.

Where it goes wrong

Using a wage rate rather than a fully loaded rate understates labour by 25% to 40%. Employer taxes, holiday and sick cover, training, supervision and the time paid but not spent picking all belong in the figure.

Time studies also measure someone being watched, which is not the same as the average across a shift. Deriving the rate from total hours paid divided by total orders shipped is less flattering and considerably more accurate.

Making it useful

Derive the per-order cost from payroll rather than from a stopwatch: warehouse hours paid in a month × loaded rate ÷ orders shipped. It captures everything the stopwatch misses and takes ten minutes to calculate.

Then track it monthly. It should fall as volume grows because the fixed overhead spreads, and if it does not, the operation is not gaining any leverage from the extra volume, which is worth knowing before adding more.

Where the minutes actually go

In most small operations, walking is the largest single component of pick time, often more than picking itself. Slotting fast-moving items near the packing bench, so the most frequent picks involve the least travel, typically cuts total pick time by 15% to 30% and costs nothing but an afternoon of moving shelves.

Batch picking is the next step: collecting the items for ten orders in one pass and sorting at the bench, rather than walking the route ten times. It roughly halves travel time on small-basket operations, at the cost of a sortation step that has to be done carefully.

The third is packaging preparation. Pre-folded boxes, pre-printed inserts and a bench laid out so nothing requires a second trip remove a surprising amount of the fixed per-order time. None of these needs software or capital, which makes them the right things to exhaust before anyone starts pricing a warehouse management system.