Often-Overlooked Financial Considerations: The Value of Partnering with a 3PL Warehouse
Operational Capability and Competency
Scaling Warehouse and Fulfillment Operations
3PL Networks and Relationships for Procurement
Expanding into New Geographical Markets
Expenses Involved in 3PL Warehousing Operations
Warehouse Building Expenses
Warehouse Equipment Expenses
Warehouse Technology Expenses
Other Corporate Overhead Expenses
How Much Does 3PL Warehousing Cost?
- “It is dependent on the scope of work.”
- “Our pricing is customized to the client.”
- “We need more information to generate pricing.”
Space Costs in Logistics
There are also indirect costs built into 3PL pricing that can be attributed to space, such as capacity planning. A warehouse is typically considered “full” at 85%. Continuing to add inventory beyond this point will crowd the warehouse and impact efficiency. This space must be accounted for in the pricing structure along with other indirect space costs, including docks, aisles, pallet racking, utilities, waste disposal, insurance, taxes, and maintenance.
Labor Costs in Logistics
3PL Pricing Models
All-In Rate Model
Transactional Pricing Model
Activity-Based (Labor) Pricing
Operational Processes and Effects on Costs
Typical Line Items Included on a 3PL Warehouse Rate Sheet
- Initial Storage: Storage that is charged for the day of arrival.
- Pallet Storage: Charges for the storage of palletized goods. This is typically a rate per pallet per month but can sometimes be provided as a daily storage rate.
- Bulk Storage: For non-palletized or oversized items that require special storage considerations.
- Bin or Shelf Storage: Costs associated with the storage of smaller items in bins, shelves, or racks.
- Split Month Storage: The product is billed in full at the beginning of the month of receiving or half the cost at the end of the month.
- Receiving: Charges for receiving, inspecting, and processing incoming inventory.
- Picking and Packing: Fees for selecting items from storage and preparing them for shipping.
- Kitting and Assembly: Costs for assembling kits or packages with multiple components.
- Labeling and Barcoding: Charges for applying labels and barcodes to products.
Order Fulfillment Fees
- Per Order: Charges for processing and fulfilling individual customer orders.
- Per Line Item: Fees associated with each line item in an order.
- Per Unit: Costs for each unit or item shipped.
- Quality Control: Expenses related to inspecting and ensuring the quality of products.
- Returns Handling: Charges for processing and managing returns from customers.
- Special Handling: Fees for handling fragile, hazardous, or temperature-sensitive items.
- Custom Packaging: Costs for customized packaging solutions.
- White Glove Services: Costs for including thank you notes, flyers, or other materials in fulfillment process.
Transportation and Shipping
- Outbound Shipping: Charges for shipping orders to customers, often with various rate options based on shipping method and destination.
- Freight Handling: Fees for loading and unloading trucks and containers.
Technology and Integration
- Warehouse Management System (WMS): Costs associated with using the 3PL’s WMS.
- Integration Fees: Expenses for integrating your systems with the 3PL’s technology.
- Account Setup: Charges for onboarding and setting up your account.
- Minimum Volume Commitments: Penalties or fees if you fail to meet agreed-upon volume thresholds.
- Monthly or Annual Fees: Recurring administrative charges for maintaining the account.
- Accessorial Charges: Fees for additional services such as labeling changes, repackaging, or special requests.
- Customized Services: Pricing for services tailored to your unique needs.