If you’re considering outsourcing fulfillment and warehousing to a third-party provider, it’s important to understand the fees that are associated with the services you require. While warehouses are generally similar in the way that they calculate charges, it’s important to know how exactly you will be charged to avoid any surprise costs. Your individual warehouse costs will depend on components like order volume, storage time and fulfillment type, but it’s good to know how common warehousing costs are calculated so you know what to budget for warehouse services.
Types of Warehousing Costs
Fulfillment and warehousing costs vary from company to company, but common fees you’ll encounter are storage costs, handling costs (including special projects like kitting, and any pick and pack or parcel requirements), and general administrative expenses. Not every warehouse breaks down their cost structure in the same way—some bundle special project work with their storage and handling fees, while some put it into a category of its own. Below, we’ve broken down four common types of warehousing costs to help you understand how these services are charged.
Receiving Warehousing Cost
Receiving costs are often built into overall order fulfillment warehouse costs and can vary between companies. Some fulfillment centers charge per unit, while others charge on an hourly basis, which typically ranges from $35-$45 per hour. When they don’t charge hourly fees, centers charge per pallet, per unit or per case or carton. There are some companies that don’t charge receiving fees in an attempt to streamline their fee structure and roll these costs into other services. It’s important to understand your fulfillment center’s fee structure completely in order to determine whether it’s a good fit before starting business with them. The number of shipments your fulfillment center will need to receive should also be taken into consideration when comparing fulfillment pricing. Some companies charge only per shipment, meaning a 10-pallet shipment would cost the same as a one pallet shipment, while other companies charge per pallet. Be sure to pick a fulfillment center whose receiving charges align with your volume and schedule of inbound shipments.
Some fulfillment centers charge per unit, while others charge on an hourly basis, which typically ranges from $35-$45 per hour. When they don’t charge hourly fees, centers charge per pallet, per unit or per case or carton.
Inventory Storage Warehousing Cost
Inventory storage is a warehouse cost that is incurred as goods rest in a facility. This is typically charged either weekly or monthly depending on the fee schedule of the provider and usually by the unit of measurement (by pallet, case, each or even storage medium which could be pallet, pick bin, flow rack and more). The most common way is to charge per pallet, although many companies offer more than just one kind of storage pricing. If you’re able to choose, make sure you select a storage method that is cost-effective for the type of products you sell. For example, if you are selling on Amazon using the Fulfilled by Amazon fulfillment method, it doesn’t make sense to store large items in their warehouses due to expensive storage fees. Pallet storage is common and can be stored as a single pallet on a floor or stacked up to four high depending on the product, as well as stored on racks. However, you can be charged for dead space if you’re not using the entire pallet, so it’s not the best option for some products. Storage by cubic foot can be preferable for many businesses with smaller items. Fulfillment centers can even store these smaller items in bins for easier picking accessibility, which can lower fulfillment fees. The last option is storage by square foot. This is not as common but can be used for bulky items that don’t fit into pallet options or when there is very little information for the provider to go off of due to lack of overall knowledge, which happens more frequently than one would think. No matter which storage options your fulfillment center offers, it’s important to fully understand these types of warehousing costs to ensure that you’re getting a good deal.
Pick and Pack Warehousing Costs
Pick and pack warehousing costs are also called fulfillment charges. This terminology refers to the process of picking, packing and shipping items, and is another warehouse cost that is charged per item. For example, the pick and pack fee for a single item for direct to customer shipping might be around $3.00. Everyone’s fulfillment cost will differ depending on the attributes of your inventory and shipments. The number of SKUs you have, the size of your product, the number of units per order, and the complexity of your packout will impact the overall pricing structure. Finding the right fulfillment provider for your business is key and knowing every intricate detail of your product and expectations for your end customer will help you make an informed decision.
“Everyone’s fulfillment cost will differ depending on the attributes of your inventory and shipments. The number of SKUs you have, the size of your product, the number of units per order, and the complexity of your packout will impact the overall pricing structure.”
Ryan Martin, President of Distribution at ITS Logistics
Kitting Warehousing Cost
Kitting fees are a type of warehousing cost that are charged when any special projects are performed to prepare items for shipment. An example of this is assembling items in a subscription box or re-ticketing and re-labeling items or cases. A second aspect of this is light manufacturing, when a fulfillment provider builds out part of the packaging, such as putting together a large box, before shipping orders to the customer. This type of warehouse cost is typically quoted on a time and cost basis, breaking down the cost per kit and calculating fees based on the number of items that require kitting or light manufacturing. These types of charges are not usually included in basic warehouse costs, so if you need kitting and assembly, be sure to get specific pricing.
Keeping Warehousing Costs to a Minimum
When looking at warehouse costs for your business, it’s vital that you have a comprehensive understanding of their fulfillment process and fee structure. You need to look out for any hidden fulfillment fees that are difficult to understand, have a lot of fine print or are different than initially advertised. Determining exactly what fulfillment centers or 3PLs charge for storage, handling, receiving, and any additional services is a must. Knowing your monthly order volume, including the amount of kitting, pick and pack, and assembly you need is very important as well. This will allow you to be sure you are getting the best deal for your business. Comparing costs of different warehousing and fulfillment services and clearly understanding them before signing a contract will help you keep your warehousing costs to a minimum.
Get Started with ITS Logistics Warehousing Services
At ITS, we know how difficult it can be to find the right warehouse for your business, and that tricky fulfillment costs can make it even harder to find the right partner. We work hard to make our pricing for all our services transparent and fair, so you know exactly what to expect. When you partner with us for your warehousing and fulfillment needs, you are assigned a client services representative dedicated to your account who can walk you through our cost structure and make sure we are sufficiently meeting your needs. For more information about our warehousing services, call us at (775) 353-5160.
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