Published by Ashir Arif on October 08, 2026
If your courier charges Rs. 200 for delivering an order, it doesn't necessarily mean your business spends only Rs. 200 on that order.
What about packaging?
What about COD charges?
What happens when the customer refuses the parcel?
What does a return cost you?
What about warehouse operations, order processing, staff, and payment reconciliation?
All of these expenses contribute to your total logistics cost.
For an e-commerce business, knowing your actual logistics cost is important because even a small difference in cost per order can significantly affect your profit when you're processing hundreds or thousands of orders every month.
In this guide, we'll explain how to calculate total logistics cost, which expenses you should include, how to calculate logistics cost per order, and how Orio Technologies can help you monitor and manage your logistics operations from one platform.
What Is Total Logistics Cost?
Total logistics cost is the complete cost a business spends to process, store, ship, deliver, return, and manage its orders.
It includes much more than courier charges.
A simple way to understand it is:
Total Logistics Cost = Direct Logistics Costs + Operational Logistics Costs + Hidden Logistics Costs
For an e-commerce business, these costs can include:
• Courier and shipping charges
• COD charges
• Packaging expenses
• Return and exchange costs
• Failed delivery costs
• Warehouse expenses
• Order processing costs
• Inventory handling
• Payment reconciliation
• Customer communication
• Logistics software and operational expenses
The goal isn't simply to find the cheapest courier.
The goal is to understand the actual cost of getting an order successfully delivered to the customer.
Why Should You Calculate Your Total Logistics Cost?
Many e-commerce businesses focus heavily on their selling price and courier rate but don't calculate their complete fulfillment cost.
This can create a serious problem.
Imagine you sell a product for Rs. 2,000 and believe your delivery cost is only Rs. 200.
After including packaging, COD, returns, failed deliveries, and other operational expenses, your actual logistics cost might be Rs. 300–400 or more.
That difference directly affects your profit margin.
Calculating your total logistics cost helps you:
• Understand your actual profit per order
• Compare courier companies
• Identify unnecessary expenses
• Reduce return-related costs
• Monitor failed deliveries
• Improve delivery performance
• Make better shipping decisions
• Set better product pricing
• Measure logistics performance
You cannot reduce a cost you don't measure.
What Costs Are Included in Total Logistics Cost?
Let's break down the major components.
1. Courier and Shipping Charges
This is usually the most visible logistics expense.
Your courier cost may depend on:
• Parcel weight
• Delivery location
• Service type
• Same-city delivery
• Nationwide delivery
• COD service
• Additional charges
• Return shipment
If you work with several courier services in Pakistan, calculate the cost of each courier separately.
This allows you to understand which courier is actually providing better value.
2. Packaging Cost
Your product doesn't reach the customer without packaging.
Your packaging cost can include:
• Boxes
• Poly mailers
• Tape
• Labels
• Bubble wrap
• Printing
• Product protection materials
For example:
1,500 orders × Rs. 25 packaging cost = Rs. 37,500
That Rs. 37,500 is part of your total logistics cost.
3. COD Cost
Cash on Delivery remains an important part of e-commerce in Pakistan.
COD-related costs may include:
• COD handling charges
• Cash handling
• Payment processing
• Reconciliation
• Payment-related operational work
If you're processing thousands of COD orders, even a small fee per shipment can become a significant monthly expense.
4. Return Cost
Returns are one of the most overlooked logistics expenses.
Consider a simple example.
A customer places an order.
You pay:
Rs. 200 → Forward delivery
The customer refuses the parcel.
You then pay:
Rs. 150 → Return shipment
Your total courier expense for an unsuccessful order becomes:
Rs. 350
And you may still have packaging, staff handling, customer support, and inventory processing costs.
That's why your return rate should always be considered when calculating logistics costs.
5. Failed Delivery Cost
A parcel that isn't successfully delivered can still cost your business money.
Common reasons include:
• Customer unavailable
• Incorrect address
• Customer refusal
• Fake orders
• Customer changed their mind
• Multiple delivery attempts
A high failed-delivery rate can increase your cost per successful order.
This is particularly important for COD-based e-commerce businesses.
6. Warehouse and Inventory Costs
If you operate a warehouse, your logistics cost also includes expenses related to storing and managing products.
These may include:
• Warehouse rent
• Warehouse staff
• Electricity
• Picking
• Packing
• Inventory handling
• Storage equipment
• Stock movement
• Damaged inventory
As your order volume grows, proper Inventory Management System and Warehouse Management System capabilities become increasingly important.
7. Order Processing Cost
Every order requires operational work.
Someone needs to:
1. Receive the order
2. Confirm the order
3. Check inventory
4. Pick the product
5. Pack the product
6. Book the shipment
7. Print the label
8. Track the shipment
9. Handle exceptions
10. Process the return if necessary
If these activities are performed manually, the cost of employees and working hours becomes part of your logistics operation.
The Total Logistics Cost Formula
Now let's put everything together.
Basic Formula
Total Logistics Cost =
Shipping + Packaging + COD + Returns + Failed Deliveries + Warehousing + Order Processing + Other Logistics Expenses
But there's another number that e-commerce businesses should pay close attention to.
Logistics Cost Per Order
Logistics Cost Per Order = Total Logistics Cost ÷ Total Orders
Let's look at a practical example.
Real E-Commerce Logistics Cost Example
Suppose an online business processes 2,000 orders per month.
Its monthly expenses are: