What does it cost to process an order from the time the need for an item is identified, to the time the invoice is processed and the order is closed out?
Why I Asked
I was tasked with analyzing the average costs of processing an order through its various stages from purchase order creation through to invoice closure.
I hoped that someone had already answered my question, so I set out to find studies that would give me an answer.
I did a lot of research, read a lot of studies, and saw a lot of numbers - but I didn't find an answer to my question. I found a lot of partial answers that had to be spliced together.
Consider that there are five key steps that contribute to processing an order:
I was unable to find one study that discussed the cost of processing an order through each of these five steps, but I did find several studies that discussed the cost of a single step.
On further examination of these studies, however, I found that each of them arrived at wildly varying numbers; for example, the cost of processing a Purchase Order internally is anywhere from $1.34 to $437.00, depending on the study you’re reading.
$1.34… what is that… stamps?
Calculations and Conclusions
It became a swirling cauldron of math, but I arrived at some interesting, measurable conclusions that finally answered the question: how much does it cost to process an order end-to-end?
In the coming weeks I’ll publish my findings on the costs of processing an order through each of the 5 steps, and then I’ll publish my overall conclusions.
What Do You Think?
I'd love to hear from you - Have you calculated the cost to process an order from end to end? Have you calculated any part of the process? What variables do you consider? Are there any parts of the process I might have missed?
I welcome your input at any time.
Find the other posts in this series at:
2nd post: http://www.p2insight.com/blog/how-much-does-it-cost-to-process-a-purchase-order-internally
3rd post: http://www.p2insight.com/blog/calculating-the-cost-to-process-a-po-externally