In December 2018 and through January 2019, we conducted our annual warehouse costs and pricing survey. This year, we polled around 600 warehouses and had even more participation than in 2017, and we’d like to thank everyone that took the time to fill out the confidential survey.

Before we launch into the results, it’s important to point out some of our assumptions. First, we did not record which answer was associated with a particular warehouse. This was done to allow vendors to confidentially answer questions without fear of providing key information about their specific company. Second, if we found any of the survey answers to fall far outside of the extremes, we did not include the results in the averages outlined below. For example, if someone indicated that they paid $75 per square foot per year for warehouse space and the next highest amount was $18, we did not include the result so that we could accommodate for any order entry errors. Unreasonably high or low answers to our survey questions could have been a result of misunderstandings related to the question or an error in entry. Third, we did not segregate the results by geography. We acknowledge that this definitely has a tendency of skewing some of the results, as we do have vendors that operate in the United States and Canada. Fourth, in cases where results were given in various formats for a single question, we made our best attempt to compute averages based upon the most common answer type given. As an example, some respondents answered that they pay a warehouse management employee a salary, while others indicated that they paid an hourly salary. Similarly, some respondents provided answers to how much they charge for pick and pack per order as a flat order fee, while others responded that they charge a per order plus a per item fee. Finally, if there were any responses that warranted further explanation, we elaborated on those responses in our discussion below, so that readers of the results can understand the various responses received.

Summary of 2018/2019 Survey Results

Overall, the hot fulfillment and warehousing market, bolstered by e-commerce fulfillment growth and increased demand for timely processing of internet-driven orders, seems to have caused warehousing costs (mainly warehouse leases and labor related costs) to rise. As a result, the end of 2018 and beginning of 2019 has seen an increase in warehousing and fulfillment pricing for outsourced services. The survey showed that costs rose in all areas for warehouses (warehouse lease costs, hourly employees rates, and management salaried staff), and as a result overall profitability decreased slightly. In order to keep up with rising costs, providers of warehouse and fulfillment services increased their pricing offered to customers across the board as well, including storage fees, pick and pack fees. Furthermore, fulfillment companies opted to extend lower shipping discounts to customers as well.

Below are the results of our latest survey. In order to make the results easier to digest, we’ve segmented them into the following categories:

• Performance Data
• Agreement Terms
• Warehousing Costs
• Pricing and Discounts

Performance Data

For performance data, our main objective was to see how many fulfillment providers use performance data to gauge the quality of their work. We asked the following questions:

1. Do you measure performance?
2. What is your picking accuracy?
3. What is your inventory shrinkage rate?
4. What percentage of customers do you retain each year?

In the survey, we found that 82.93% of companies polled measure their performance in some way. The average picking accuracy for order fulfillment companies was 99.19%, and the average inventory shrinkage was 1.26%. Respondents, on average, retained 99.52% of their clients. Performance data results didn’t vary significantly from our 2017 survey.

Agreement Terms

We get a number of questions, both from warehouses as well as companies looking to outsource, about the standard terms of agreement that fulfillment houses employ. In our survey, we asked:

1. What terms do you offer on your agreements? (month to month, annual, multi-year, or no term) This question allowed warehouses to respond with multiple agreement types, since many firms are flexible and offer different terms to different customers.
2. Do you increase your pricing on a regular basis?
3. If you do increase your pricing, what percentage do you increase pricing?

In the survey, we found that 56% offer month-to-month agreements, 61% offer annual agreements, 37% offer multi-year agreements, and 12% don’t require an agreement in all cases. Month-to-month agreements rose slightly in popularity from 10.26% to 12%. More significant, however, were increases in annual and multi-year agreements. The use of annual agreements rose from 38% in 2017 to 61% in 2018/2019, and the use of multi-year agreements rose from 25% to 37% over the same periods. Furthermore, 64.29% of all respondents said they do increase pricing yearly. The rate of price increases nearly doubled – in 2017 the average increase was  2.37% and our latest survey indicated that the average rate increase is now 4%.

Warehousing Costs

It’s helpful for warehousing companies to see what others are paying to maintain their warehouse. In the survey, we asked:

1. What is your yearly cost per square foot of your warehouse space?
2. What is your starting hourly rate of your warehouse staff?
3. What is your annual pay for a warehouse management employee?
4. What is your corporate profit?

The average cost per square foot of warehouse space was $7.79, a marked increased of $6.53 in 2017. The average starting hourly rate of warehouse staff was $13.32, and the average annual pay for a warehouse management staff was $50.524 (2017 results were $11.44 and $47,478 respectively). The average corporate profit came in at 7.25% for 2018.

Pricing and Discounts

In order to get a feel for the going rates of fulfillment companies, we polled warehouses and asked them questions relating to their pricing and discounts that they offer customers. Not only do warehouses need to understand the competitive landscape, but we also get tons of questions from companies looking for outsourced fulfillment services that are looking to uncover the average fulfillment pricing, costs and fees. For pick and pack fees, we asked:

For order fulfillment pricing, we asked:

1. What is your average pick and pack price for a single item direct to consumer order?
2. What is your average pick and pack price for a business to business order?
3. Do you offer discounted pick and pack rates?
4. If you do offer discounted pick and pack rates, what is the break with which you offer the discount and how much of a discount do you offer?

The average pick and pack fee for a single item B2C order was $2.86 (up from $2.64 a year ago), whereas the average fee for a B2B order was $4.17 (up from $3.74 a year ago). An overwhelming 74.29% said that they do offer discounted pick and pack fees based upon volume of orders (which was unchanged from 2017), and the average discount was applied at 1,000 orders per month (with the highest frequency of responses either 500 or 1,000 orders per month). Discounts ranged from 5% up to 10%.

We did introduce an additional question in the 2018/2019 survey – ‘Do you charge differently for Amazon orders, and if so by how much?’. We found that 57.14% do in fact charge different for Amazon orders. On average, fulfillment houses charge $1 more for Amazon orders.

For storage pricing, we asked:

1. How do you charge your customers for storage?
2. What is your average price for storage?
3. Do you offer discounted storage fees?
4. If you offer discounted storage fees, at what breaks do you offer discounts and what discount is offered?

The most common way of charging for storage was pallet storage (90.24% – which was a 10% increase from 2017), followed by storage per bin (26.83%), per square foot (24.39%) and lastly per cubic foot (12.2%). These percentages reflect that companies, in many cases, offer more than just one storage pricing. Warehouses shied away from pricing per cubic foot in 2018 and into 2019.

The average pallet storage fee came increased only slight from $13.02 in 2017 to $13.20 in 2018/2019. The average cubic footage charge was $.5, the average cost per bin was $2.85, and the average cost per square foot was $.66. A full 48.65% of respondents offered discounted storage solutions (mostly at pallet levels), which was largely unchanged from last year’s survey. The average discount was 10% given at roughly 500 pallets.

We surveyed the warehouses about their shipping pricing and discounts. Questions included:

1. How do you charge for shipping?
2. If you offer shipping discounts, what discount do you give for ground, express, and LTL shipping?

With regard to shipping pricing, again we found that many companies offered a number of approaches. The most common approach (43.90%) was to allow customers to use their own rates. This was interesting, as many fulfillment providers rely upon making margin on freight. Not far behind, however, was the option of offering a cost plus model, where they mark up their shipping costs (41.46%). About a third of the respondents (31.71%) offer a percentage discount off of published rates, and 14.63% responded that they don’t apply a discount at all. When discounts were offered, the average shipping discount for ground was 20.02%, for express was 29% (both of which were decreases from 2017. 51.33% was the average discount given for LTL freight.

Set Up, Account Management, Receiving, and Returns Fees

In 2018/2019, we expanded our survey to ask questions about other ancillary fees fulfillment companies sometimes charge. The questions included:

• If you charge a set up fee for a new client, how much do you charge on average?
• Do you charge a routine account management fee, and if so, how much and how frequently?
• Do you charge returns fees, and if so how much?
• Do you charge receiving fees, and if so how much?

The average set up charge was $336, but some companies charge as much as $2,000-$10,000 depending upon the complexity of the integration. 56.41% of companies in our survey indicated that they account management fees, and the average fee was $226.54 per month. 84.62% of those surveyed indicated they charge returns fees and the average charge per single unit return was $3.53 (although some companies charge the same as their standard pick and pack fee OR around $35 per hour). Most companies polled charge a receiving fee (94.87%). Receiving fees varied widely including depending upon the unit of measure: $.25 unit; $7 pallet; $31.95 hour; $373.33 container; $1.21 carton.

It’s no secret that Amazon is the powerhouse when it comes to online commerce. If you’re thinking of selling products through Amazon’s marketplace, you’ll want to make sure you have the preparation process figured out down to a T.

If you’ve ever seen an FBA warehouse (Fulfillment by Amazon) operation in action, it’s pretty impressive. They employ more that 15,000 robots to help retrieve products, have huge conveyor belts to transport product from storage to packing stations, and they ship 35 items every second. In fact, Amazon’s outbound shipping cost is over $1.5 billion a year!

One of the main reasons why Amazon can ship so many items each day is because they’ve streamlined their inbound process. That minimizes the time it takes to receive products and get them ready to be picked, packed and shipped. They’ve been able to streamline their receivings by passing the preparation process on to its vendors.

Failing to comply with FBA product preparation requirements may result in the vendor being charged for non-compliance and/or their products being returned, disposed of, or even blocked from future shipments to the fulfillment center.

Amazon does offer its vendors guidelines such as its Quick Reference Guide on how to prepare inventory for FBA. However, the opportunity cost of vendors preparing products for fulfillment takes away from sales and marketing. A lot of fulfillment centers—like ShipMonk, for instance—saw an opportunity and began offering FBA prep services to help vendors prepare their inventory before it’s sent to an FBA warehouse. Everything from opening containers and repackaging thousands of SKUs to simply labeling products correctly with barcodes—prepping products for FBA is essential if you want to be a successful Amazon vendor.

Here’s a list of various FBA Prep Services:

•      Quality control
•      Repackaging
•      Labeling
•      Fragile item preparation
•      Loose products
•      Sold as a set
•      Boxed units
•      Poly bagged units
•      Case-packed products
•      Expiration dates

Now that you understand the importance of Amazon preparation, you’re probably wondering if you should do it yourself or look to a fulfillment center for help.

The answer isn’t anywhere near cut and dried. Therefore, you’ll need to take into account the following:

Where is your product manufactured?

The best solution would be for your manufacturer to prep the products for FBA for you, but you’d have to calculate how much that affects your shipping rates. If you’re importing from China or another foreign country, you’ll probably want to save as much as you can on shipping to the U.S. To do this you’ll need to put more than 1 SKU on a pallet—which is great for lowering costs but makes the product unfit as an FBA receivable.

How many SKUs do you have?

If you have a lot of different SKUs that require different prep services, it may be too much to keep track of and stay up-to-date. Also, do you have the space and equipment to de-palletize and repack the products on pallets or in boxes for FBA?

What packing materials are needed?

If you need specific packing materials such as poly mailers, fragile item wrapping, or labels, a fulfillment center may be a great option. They have various materials in stock and may even give you a discount since they can purchase in bulk.

What’s your profit margin?

How much are you selling your products for and what are you making? If you have room in your profit margin, it probably makes sense to outsource the FBA prep service. Then you can focus your efforts on expanding your product line and/or selling more product. (Unless, of course, you just love working in the warehouse, then absolutely, you should not outsource!)

Is the risk worth the reward?

Can your business afford to have its products returned or be billed a non-compliance fee for failing to meet FBA standards? A reputable fulfillment center will include in their SLA that if something happens due to not following FBA guidelines, the fulfillment center will assume responsibility.

Are there seasonal spikes throughout the year?

You may want to prepare inventory yourself throughout the year except for the holiday season. During that time, you’ll probably want to focus on customer service and marketing. So consider outsourcing FBA prep during those busy months and then take it back into your own hands if you want to cut back on outside costs during the off season.

What can I be doing with the resources it takes to manage FBA prep?

This is the million-dollar question that only you can answer. Most business owners can manage the FBA prep process, but—will it take away from growing your business?

FLINT, Mich., January18, 2013 — NorthGate announces they have achieved ISO 9001:2008 certification. Perry Johnson Registrar, Inc., (PJR) assessed the Quality Management System of our Corunna Road and Dort Highway facilities in Genesee County Michigan and declared NorthGate to be in conformance with ISO 9001:2008 standards.  PJR issued Certificate # C2012-03268 effective December 27, 2012.

This certification is the culmination of years of consistent top-quality work, and the dedication of our employees, stated Teresa Witt President of NorthGate. She continued saying, “although NorthGate has been operating under the guidelines of ISO 9001:2000 standards for many years, I believe our decision to upgrade to ISO 9001:2008 Certification is a proactive one that not only anticipates the demands of customers, but also demonstrates NorthGate’s commitment to providing quality products and services.”

The scope of the certification for NorthGate’s Corunna Road packaging and order fulfillment processing center entails; design, development, assembly, sub-assembly, sorting, inspection, packaging, warehousing, shipping, supplier monitoring, processing, and distribution for automotive products and other industries.

The scope of the certification for NorthGate’s Dort Highway reverse logistics, packaging and order fulfillment processing center involves; development, sorting, inspection, packaging, warehousing, shipping, supplier monitoring, processing, and distribution for automotive products and other industries.

ISO 9001:2008 is a set of international standards and guidance documents for quality management and quality assurance. The standard represents an international consensus on good management practices, policies and procedures with the aim of ensuring that our organization can consistently deliver the product and services that meet the customer’s quality requirements.

NorthGate, is a third-party, cost effective business solutions provider of Warehousing, Packaging, Fulfillment Processing and Reverse Logistics services. We are an independent, family-owned business dedicated to providing hard work and outstanding customer service. NorthGate offers a strategic location in the heart of North America’s industrial engine, where we have prime access into a vast array of major US and Canadian cities. Our vision is to be your partner… now and in the future, through every challenge, and every success.

Want to learn more on how NorthGate can make a difference in how your business is done? Please visit us at www.go2northgate.com or contact us at [email protected] or by phone 1-810-235-8110.

Amazon Fulfillment Fees Increase Hits Online Retailers Hard

by Will Schneider

Most online retailers using Amazon Fulfillment will be hit hard starting in February of 2013 with a multitude of price increases targeted to combat increasing transportation costs. Most notably, the fee increases include an adjustment to the “weight handling” fee and an addition of a returns processing fee. These fees and increases will apply to anyone that self-fulfills through their system – in an attempt to further entrench customers by giving them incentive to fulfill by Amazon.

Like many of the price adjustments over the last couple of years, these recent increases hit retailers hard – and at a time when many online merchants are struggling to squeeze as much profit out of their company as possible and weather the economic storm of the last couple of years. In particular, smaller businesses may find these particular fee increases a heavy burden to shoulder next year.

“Of anything that we hear most about the Amazon Fulfillment network, the vast majority of comments are related to expensive pricing structures and challenges with unique service requirements and flexibility,” noted Will Schneider, CEO of WarehousingAndFulfillment.com. The well known fulfillment provider is definitely the “800 pound gorilla” in the fulfillment space, offering multiple locations, quality execution and tie in to its Amazon network. But, as Mr. Schneider notes, “for many smaller companies in particular, the large orientation of Amazon makes addressing the challenges of a smaller business difficult – from lack of branding options, difficult to come by personal customer service, and now a series of price increases that make is less competitive with other outsourced fulfillment options.”

Of course, a price increase is never easy to swallow, although oftentimes understandable. But the interesting part will be to see what the Amazon Fulfillment fees increase, which was announced during the holiday season, will bring for Amazon in the New Year.

by Will Schneider

Ferber Warehousing just announced that it is selling its proprietary logistics software, Conveyorware.com, to fulfillment and logistics firms. The software, which includes decades of customs from industry needs and experiences, will be sold as a SAAS (Software as a Service), starting at just $100 per month for 5 users. It’s an all inclusive software, managing the entire 3pl process from start to finish, simplifying the systems needs of growing 3pls.

To learn more about the software, please visit the Conveyorware software at www.conveyorware.com or read the press release about logistics software.

by Will Schneider

If you’re operating a new business, chances are that you may not know what a 3rd party logistics provider is and what they can do for your business. And contrary to popular thought, 3rd party logistics providers offer more services than most might think. So we thought it would be important to define the term and then show you some of the important things that these companies can provide for your small business.

Logistics companies help bring your product from manufacturer or supplier to your end customers. And for some, this could entail quite a bit of steps. For example, let’s say you have your product produced in another country, and you sell your product to consumers in the United States. In this case, you will have to ship it to the United States, clear customs, deliver it to whatever warehouse will store and ship the goods, and finally ship orders out as needed to customers. All of these services can be fulfilled by a 3rd party logistics provider.

So what is the benefit to using one of these companies, you might ask? Well, for starters, this is a lot to manage on your own. So having someone help take care of this part of the business lessens the load significantly. Also, these companies are experts at what they do, so they can oftentimes do it better than you might be able to do yourself. Finally, they ship a lot of products for many companies, which means that they get great shipping rates from freight companies – and they can pass these great rates to you so that you can save money for your company and your customers.