Warehouse Rates Explained

Today’s warehouses are much more than static storage, they are hubs of high-speed activity. That movement requires labor, technology and a process of some kind to carry out. Ever wonder how warehouse fees are generated? Warehouses rates consist of two main components – storage and handling. Although, there are some projects that may require more work than just these two components. This additional work can be categorized under specialized fees. In this article, we will take a closer look at all three and its factors.

Warehouse Rates Graphic

Storage

Storage fees are most often calculated by the square footage a product is using. This can be provided by a square footage rate or a per pallet rate. Listed below are some factors that are reviewed when developing a storage rate.

Stackability

The way goods are stored will have the biggest impact on the storage rate. Is your product stackable? How high can your product be stacked? If the answer is yes and 4 high, chances are your fee will be more favorable. Being able to stack your product 4 high is a huge benefit since less square footage will be required. The more your product can be stored efficiently in a safe manner without jeopardizing it, the better the rate.

Honeycombing

As your products are moving in/out of the warehouse, empty space is created. As a result, the space is not being used optimally and reorganizing may be required. Sometimes it’s a matter of efficiency of handling. If your product is organized by SKU and has a high turnover rate, it will be more efficient to organize in a honeycomb format. Usually, underutilized space is not beneficial, but sometimes there is a tradeoff between empty space that is a loss of storage capacity and optimized handling.

Inventory Turn Rate

The inventory turn rate relates to the volume and frequency that product moves in and out of the warehouse. Storage rates are incurred on a monthly basis, so the higher the turn rate, the less time a product spends at the warehouse. Therefore, causing a lower storage rate.

Special Requirements

Some product such as food & beverage, chemicals, etc. will require special equipment such as racking or temperature control. These will have a significant impact on storage rates.

Handling Fees

Handling fees are expenses associated with moving your product in and out of the warehouse. This includes unloading your product from a trailer or container, receiving it into the WMS, and shipping it out to your customers. Handling fees can be priced by the pallet, unit, order, or a combination of all three. In addition to the normal handling of your product, additional handling may be required depending on the scope of work.

These can be categorized as followed:

  • Kitting & pick packing
  • Bundling
  • Testing and inspecting
  • Order processing & fulfillment
  • Packaging and repacking
  • Stretch wrapping
  • Inventory control

Specialized Fees

There may be other fees related to administrative expenses such as financial reporting, additional inventory reporting and data, or technology implementations such as electronic data interchange (EDI) or enterprise resource planning (ERP). These setups may be required to provide business insights or allow orders to flow automatically through systems. These fees are typically a one-time fee at the start of the integration between you and the 3PL and remain unchanged throughout the contract.

Benefits of a 3PL

When working with a 3PL, it’s important to understand the fee structure. Many companies find that outsourcing this to the experts like Evans Distribution Systems is more efficient and cost effective than taking these operations on independently. 3PL’s specialize in offering these services. They acquire trained labor and optimize operations to full capacity. Allowing experts to take over your operations, gives you the flexibility to focus on your core competencies. Contact us today and let us help you.