Meaning and example
In an inventory-management model, order fulfillment costs are the costs of organizing one replenishment: processing, approval, receiving and other operations included in the perimeter. They are separated from the price of the goods themselves and from holding costs. If each order requires an illustrative 500 units of administrative cost, 10 orders give 5000 under the specifically assumed unchanged cost. Actual expenses may depend on batch size and delivery method. The calculation must disclose what is fixed per order, variable per unit and already included in the price, so that costs are not counted twice.
How to avoid a mistake
Here, the term refers to an order that replenishes inventory, not to delivering a purchase to the final customer. If doubling the batch does not double processing costs, the fixed component is spread over more units. That effect should be compared with additional holding costs rather than treated as proof that a large order is always beneficial.
For more on the relationship between cost and write-downs: [the educational analysis](/guides/inventory-cost-nrv/).
Sources and review boundaries
Support: **gl-mit-inventory**. The example is editorial. Sources verify the concept, but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.