Fulfillment Services Pricing and Costs: What You’ll Pay for an Outsourced Company
Do you really know how much fulfillment services cost? Getting products properly delivered to your customers is an essential part of your brand, but cost matters in how much profit you’ll make. When seeking out fulfillment centers, vetting is essential to make sure you find ones that work at your budget level. Nonetheless, the first question most companies ask is, “how much will fulfillment outsourcing cost”?
View the summary slideshow below or keeping reading further down the page to get an even further explanation!
Not all fulfillment warehouses are alike, and some charging more for supposedly superior services may not really live up to the hype. You’ll be glad to know many 3PL warehouses are out there that are very affordable. We can help you find them here at insightQuote.
In many cases, you’re better off going with an outsourced fulfillment company since they’re very budget-friendly and they specialize in this one function – driving down their overall costs. In fact, there are a number of reasons outsourcing will save your company money:
- Volume discounts received on shipping that will equate to better freight prices than you would be able to obtain on your own
- Reduced fixed costs to run your business, such as lease costs, since you’ll only have to pay for the space that you use – which can be extremely helpful for cyclical business models
- Volume discounts received on other supplies, such as boxes, packaging, etc
- Decreased time and costs managing a base of employees
- Value created from spending time on growing your business rather than shipping orders
Keep in mind cost still isn’t measured in one lump sum. Costs come from different fulfillment categories that you’ll need to know. And most often, fulfillment services companies charge based upon the services that they perform for you during the month. In this post we will try to address everything that you need to know in order to fully understand fulfillment pricing and costs. Below we will explore:
- The Main Types of Fees that Fulfillment Companies Charge
- Volume and Contract Discounts
- A Detailed Breakdown of All Potential Fulfillment Charges
- An Example Fulfillment Proposal to Give You a Feel for a Monthly Bill
- Keys to Look for When Comparing Fulfillment Companies Pricing Proposals
- Estimates for Fulfillment Costs as Percentage of Sales for Budgeting
- A Comparison of Costs of In-House Fulfillment Versus Outsourced Fulfillment
- Results of Our Fulfillment Pricing Survey that Details Average Fulfillment Prices
A Thorough Examination of the Fees that Fulfillment Companies Charge
The Four Most Common Types of Fulfillment Fees
While there are a small percentage of fulfillment companies that use creative pricing structures (such as charging a percentage of sales methodology or charging a flat fee without additional ancillary fees), the vast majority of fulfillment houses use activity based pricing – which simply means that they charge you for each service or “activity” that they perform for you. Typically, they will total up all of the activities that they performed for you each month and then invoice you monthly, although some may charge on a more frequent basis such as bi-monthly. While there can be quite a few different charges on your invoice, the main fees that you will encounter are:
- Initial Set-Up Fees
- Receiving Fees
- Storage Fees
- Fulfillment or “Pick and Pack” Fees
- Shipping Fees
Unfortunately, every 3PL company has different rates that they charge, which makes it very difficult to compare 3PL costs among the various options. But there are some common charges that you will encounter that we’ve included below so that you can begin to familiarize yourself with what to expect.
Some important notes to keep in mind about the various fees:
- Initial set up involves the integration of your company with the 3PL, which can include set up of warehouse space and integration of computer systems. The most common examples are web store integration and EDI set up.
- Receiving is when the 3PL actually accepts your product into their warehouse, counts the goods, inspects it for damage, labels it if necessary, places it in its proper location in the warehouse, and enters the counts into their inventory system which can be viewed in their online reports.
- Storage is usually factored on a monthly basis and is most often based upon the average inventory over the monthly period. This frequently takes the shape of the warehouse taking an inventory count of all of your goods at the same time each month. The standard unit of measure is either valued on a per pallet basis (4 feet by 4 feet by 4 feet), square footage basis, or a cubic footage basis so 3PL costs will have to be compared.
- Fulfillment fees are incurred when warehouse workers physically go out and pick and package your orders for shipment to your end customers. Be careful to explore with the 3PL who will be providing boxes and packaging materials. Fees for fulfillment can vary significantly, so be very careful when a 3PL company has a very low fulfillment rate. Sometimes they’re trying to lure you in with a low fulfillment rate only to provide higher rates in other areas.
- Shipping is one of your greatest areas of opportunity with 3PL costs. Usually, they’ll be able to get much better rates than you. Either they’ll offer you a mark up over their cost or a discount off of published rates. This can be a great area of savings for your firm.
Now, let’s take a deep dive into each specific fee to explore them more in depth.
Initial Set-Up Fees
It seems most set-ups for business services require a fee, and fulfillment centers are no different. Costs for this range widely, however, so you need to shop carefully. These fees can range from the hundreds of dollars to possibly thousands of dollars. On the low end, they will likely run from $120-$1,50, although some of the larger companies that focus on more sophisticated integrations may charge thousands to integrate depending upon the difficulty of the integration and overall setup.
The average setup fee is around $550, with some providers coming in lower, especially if they focus on helping startups and smaller businesses with lower overall fulfillment charges and fees. Also included in the set up fee is the cost to set up the account in the fulfillment center’s system, including SKU set up, establishing processes and procedures specific to the customer, etc.
What you pay depends on what you need to get started. The biggest expense comes from connecting your online shopping cart to the warehouse. This requires some technical assistance from IT professionals. Even so, going through an outsourced warehouse typically saves you money than other options. Just to integrate your cart with the fulfillment center’s WMS (warehouse management system) costs up to $450 on average, and some companies charge a monthly fee for upkeep of the integration and online reporting, usually ranging from $50-150 per month.
Receiving Fees and Intake Fees
You can also call this receiving and sorting, which requires you sending your products to the warehouse to maintain product inventory. On average, fees for this run about $35-$45 per hour. Most fulfillment centers charge on a per unit or hourly basis, though they sometimes add more fees if you need extras like bar code scanning and damage inspection. Some will charge a per order receiving fees (such as $30-50 per order), while others charge per pallet ($4-15) or per item ($.20-$.25) or per SKU ($2.50-$10.00) or per box ($2.90). Some companies charge per incoming container for receiving, with an average 20 foot container receiving fee costing $330 and an average 40 foot container costing $441.
Making the comparison even more difficult is that some companies don’t charge fulfillment fees, attempting to “streamline” their fee structure. In this case, they may roll the receiving fees into the order fulfillment/pick and pack fees (thereby eliminating the receiving charge but making their fulfillment fees appear higher). Be extremely careful when comparing options that don’t charge a receiving fee. Properly receiving your product is arguably the most critical step in outsourcing your fulfillment, and if anything is inaccurately received it will negatively impact overall operations – which is why fulfillment companies should charge a receiving fee and why you should be suspicious if they don’t. By the way, if you’re researching a fulfillment company and they don’t charge a receiving fee, you should definitely ask them where they’re making up this cost in their other fees, because it’s virtually impossible to not charge a receiving fee and survive.
Receiving encompasses a great deal of tasks like product unloading, counting inventory, inspecting it for quality, inventory data entry, and physical storage in pallet, bins, etc.
Storage Fees – Either Pallet Storage or Cubic Footage Storage or Square Footage or Bin Storage
A large part of your fulfillment fees will come in the form of storage of your product in the fulfillment center’s warehouse. They charge for this service based upon how much storage space you utilize on a monthly basis, and it can run $8-$40 for each pallet (we found the overall average pallet rate to be $14.79 per pallet per month). The range is wide and is influenced by location, volumes, special warehouse requirements (such as climate controls), etc. You may also incur extra charges for shelf space if requiring additional storage to accommodate your product. Typically, the warehouse will pick a day each month to perform a pallet count, and they will calculate the total pallet storage pricing per month based upon that calculation.
Some companies break from the norm of pallet storage fees and rather charge storage fees based upon cubic footage used, which accommodate for pick bins better. These fees generally range from $.45-$.55 per cubic foot. Two other forms of charging for storage that are less common is a fee per bin ($4.07 per bin on average per month) and a per square footage ($.75 per square foot per month).
Overall, warehouses figure costs on cubic footage or square footage or pallet storage or bin storage. Since fees go by a monthly charge, some of this could vary depending on what your inventory is at a given time – which is one of the perks of using a fulfillment service. You only pay for what you use that month – something that you can’t do if you lease or own a space of your own. Leased or owned space is a fixed cost each month, regardless of whether you fully utilize it or not (not to mention that it is an encumbrance).
Remember that more fees could apply if you need storage services like temperature control, food grade, hazardous or other specialized needs. For more specialized storage needs, such as climate controlled, expect a surcharge over the typical warehouse fees. In our surveys, we found that climate controls warrant a 73% premium, averaging $16-23 per pallet per month (or about $.65 per cubic foot).
Different Ways Fulfillment Companies Charge for Storage: From Pallets to Bins
Storage in a warehousing company is important for your company, especially if you need to store inventory there during long-term periods. The reason you may need this now is you’ve likely outgrown the space your startup had in the beginning. Now you need some third-party storage somewhere.
Rather than having to rent out more expensive storage facilities, many fulfillment centers provide the storage for you. This works as double duty in being able to outsource your fulfillment to a third-party warehouse while still providing ample inventory storage space.
However, it’s not a cut and dry process for warehouse storage. Fulfillment centers frequently charge for storage in different ways. It ranges from pallet storage systems to charging by cubic footage, or even square feet.
Other times, it about storage bins or cabinets. What you choose matters based on what type of products you sell. You’ll have to determine different ways fulfillment companies charge for storage to decide what your best storage approach is in the coming year.
Storage by Pallet
A great thing about pallet storage is they’re so easy to assemble in any public warehouse setting. They come in different sizes as well, giving you warehouse options on where these fit within the four walls.
It gives you alternatives when you have various-sized products that require more storage space than others.
Even better is pallets don’t take up a lot of floor space, so it leaves room for warehouse employees to move around without obstructions. In many cases, you can assemble pallets based on the width of the warehouse aisles. For instance, you can get narrow or very narrow aisle pallet racks for more efficient utilization of floor space.
Other pallet options include double-deep pallet racks, or pushback racks. Pallet flow racks are also popular, which works on any floor level in warehouses.
Generally, you’ll get charged between $8 to $15 per pallet every month.
The Advantages of Storage by Cubic Foot
One negative with pallet storage is you sometimes get overcharged for what’s known as “dead space.” Storing by cubic foot is preferable for many businesses because it’s so easy to calculate using automated systems.
All that’s necessary is calculating the dimensions of your items by multiplying total units by cubic feet. Then you need a sum for all your SKU’s for an accurate assessment.
Many automated programs do this for you, saving time for your warehouse on calculating what they’ll charge you. Nevertheless, storing by cubic feet still requires extensive management since you’ll need constant updating of product dimensions, including new items as they become available.
Typically, you’ll get charged between $.45 to $.55 per cubic foot per month.
Storage by Square Feet
It’s possible your business sells unique products that are more difficult to store. Larger products fall in this category, and it’s going to require different methods of storage to accommodate.
Storing products by square footage isn’t overly common, yet typically used for bulkier items not normally fitting into pallet or cubic feet storage options.
Choosing your items means you’ll get charged per square foot, which might require a set amount of square footage in your contract.
Generally, you’ll get charged between $.50 to $1.00 per square foot, with the average running around $.75 per square foot.
Storage Cabinets or Bins
You may run into some fulfillment houses that prefer using cabinets or bins in the fulfillment center for easier accessibility. In many cases, storing products this way enhances security since most cabinets and bins have a lock and key, or it makes “picking” orders more efficient – which translates into lower pick fees!
Storage cabinets are sometimes more expensive to build and maintain in warehouses because they frequently require more materials, refrigeration or electrical components. Because of these features, pricing is going to become a little higher for the sake of added protection.
Overall, though, volume is going to determine pricing more than anything. It’s not to say you still can’t find lower rates with the right fulfillment warehouse.
Typically, you’ll pay between $2.00 to $6.00 per bin for storage, with the average running at about $4.07 per bin per month.
Order Fulfillment Charges, Also Known as Pick and Pack Fees
Even though terms like “Pick and Pack” still sound arcane, you need to learn some of the terms to understand industry fees. “Pick and pack” is merely another definition for the fulfillment process, or gathering and packaging all your orders – fully preparing the order to be sent to your customer but not including the cost of shipping. Sometimes, people within the industry use “pick and pack” to describe the process of individually picking single items, or “eaches”, as opposed to pulling case/carton orders or full pallet orders.
For outsourced warehousing fulfillment providers, fees usually run up to $5 or more per package, and $3.13 is usually the average for a one item B2C order (with $4.27 being the average for a B2B order). Generally, you’ll see it structured as a per order fee PLUS a per item fee. In other words, there may be a $2.50 per order fee plus $.50 per item picked. As an example in this case, a two item order would cost $3.50 ($2.50 to pick the order plus two times the $.50 per item fee for a total of $3.50).
They frequently charge you via packaging materials used and how many items go into a package. Sometimes weight factors in as well, so expect to pay a little more for heavier products. Some companies include packaging into this cost, while others charge an additional box fee – so be sure to check with your fulfillment company to see if the materials are included in the pick and pack fees. For a standard sized box, companies typically charge you a 10-15% markup over their cost, which would amount to $.50-$.1.15 per box for a small box. If a company charges a separate box fee in addition to a pick and pack or fulfillment fee, then the price to fulfill the order would be the pick fee (e.g. $3.13 per order) plus the box fee (e.g. $.50) for a total of $3.63.
Sometimes you might require the fulfillment services to insert another item into each order. For example, you may wish to include a future coupon or some other form of marketing literature. Fulfillment centers will usually charge an order insert fee for adding this additional insert into the order. The average cost for an order insert is roughly $.15 per order, but can range from $.05-$.20 per order.
Comparing Order Fulfillment Fees
Unlike many other business service providers, order fulfillment pricing companies structure their pricing proposals in a multitude of different ways. In particular, order fulfillment fees are packaged differently, making it complicated to compare competing quotes. So if you find it exhausting to review various offers from order fulfillment providers, then take a look at some of the tips we’ve listed below. These will help you decipher the code to fulfillment fees, and hopefully in the process make it easier to choose the best fulfillment firm for your company.
Most Order Fulfillment Pricing Falls into One of Two Main Categories
Thankfully, most logistics companies structure their order fulfillment fees in one of two ways. We’ve detailed the two main options below so that you can more easily understand how they work.
Option 1 – Average Order Fulfillment Fee
Under the average order fulfillment fee option, outsourced providers utilize one “average” fulfillment or handling fee to be charged for every order, despite its size. In this case, you’ll incur the same fee per transaction whether there was one item on the order or eight. Companies that use this structure base the order fulfillment fee on an average sized order, knowing that there will be some outliers, both below and above the average order size. This type of structure is used to keep things simple.
Option 2 – Order Fulfillment Fee plus Item Fee
Under the “order fulfillment fee plus item fee”, logistics providers charge a flat order fee for every order shipped plus an item fee for every item picked on the order. So, if one order has 3 items, then you would incur an order fee plus 3 item fees. Companies that utilize this structure believe that it more accurately conveys the time and effort needed to pick and pack an order, regardless of the size of the order. It can be a little more complicated, but it tends to provide a way of accurately charging orders of various sizes.
Be Aware of Low Fulfillment Fees Combined with Other Hidden Fees
Sometimes, warehousing providers provide extremely low order fulfillment fees and then charge high fees in other areas, so as to camouflage the higher costs and attract new business. They do this because order fulfillment fees are one of the most important fees that businesses assess when choosing a provider. When you compare pricing, make sure to view the entire pricing proposal in relation to other providers so you don’t get caught with this trick.
Who Pays for Boxes and Packaging Fees
Typically, fulfillment firms don’t include the cost of the carton or packaging into the order fulfillment fees. Therefore, be careful to measure the impact of additional packaging in relationship to the overall pricing.
Shipping can be Another Sizeable Component of Fulfillment Fees
Finally, make sure to get a good handle on the shipping fees charged. These are a very sizeable component of all order fulfillment fees, and they should be weighed carefully when making a decision. Usually the best way to do this is to provide a couple of mock shipments for quoting purposes. Then have the competing fulfillment firms offer a shipping rate for comparison.
General Shipping Charges
Shipping charges are one of the largest fees you’ll run into – whether you do your own fulfillment in-house or use a third party fulfillment house. The shipping procedure does cost money, yet you could save money going through the warehouse’s account rather than you own. One reason is because warehouses get good rates from most carriers due to aggregate shipping of all of their customers. But, not all warehouses offer discounts, and some prefer to have you use your own rates. In our latest survey, we found that 9% of companies don’t offer a shipping discount, and 39% of companies at least allow you to ship on your own. Of those that do offer shipping discounts (almost 93% of them), 37% use a Discount Off of Published Rates model (where they give you a certain percentage discount off of retail rates), and over 64% use Cost Plus (which is taking their cost and adding a percentage market up).
While you can save money here, most fulfillment companies give you discounts anyway. It’s all based on the volume of your packages. Overall, you could have extra fees if you insist on shipping through your own company account. In general, for ground shipping, fulfillment companies may be able to provide you with a 10-20% discount off of published (or more if you have high volume). In the case of express shipments, they’ll likely be able to provide an even higher discount, such as 20-30%. For LTL and truckload shipments, discounts can be sizable – up to 45-50%+.
Special Consideration for Pallet In, Pallet Out Scenarios
Some companies won’t need a full slate of fulfillment services. Rather, they may ship in product by the pallet, have it stored in the warehouse, and then ship out pallet or larger orders as needed. In this case, there is no need for pick and pack services and other specialized services. With pallet in, pallet out scenarios the fees are fairly straightforward – you’ll incur a pallet in fee for having the warehouse receive the pallet (usually between $2-5), you’ll incur a pallet storage fee of between $8-15 per month, and you’ll incur a pallet out fee for the warehouse to pull the pallet and place it at the dock for pick up or shipment (usually between $2-5). If you need the warehouse to ship the pallet, then there will also be a shipping fee.
Don’t Forget About Volume and Contract Discounts
One thing you’ll find consistently when searching for fulfillment companies is that they always ask about your volume – how many orders you ship per month, how much warehouse space you require and how much shipping services you use. Not only are they trying to find out how large of a customer you might be for their warehouse, but they’re also able to use this information in order to determine whether or not you are eligible for a volume discount.
Volume discounts are lower prices in exchange for higher volume levels. You win because you get a lower rate per order, pallet or shipment. They win because they are shipping in higher volume. In our most recent survey of warehouses, a full 70% of fulfillment companies offer discounts for order fulfillment depending upon volume, 62% offer discounts for storage services, and over 70% of fulfillment providers use some form of discount on shipping services (either cost plus or discount off of published rates). Below describes some of the potential volume discounts you might receive, and what volume breaks are required for each service:
|Fulfillment Service||% of Co’s that Discount||Volume Break||Average Discount|
|Pick and Pack Fee||70%||500-1,000 orders/month||6.94%|
|Pallet Storage Fee||62%||100-500 pallets/month||7%|
Another way to receive lower prices and/or to potential decrease any rate increases is to lock into a longer term agreement. While many fulfillment companies offer the option of month to month terms (46%), 57% offer yearly terms and 48% offer multi-year agreements. Especially in the case of multi-year agreements, fulfillment firms usually offer an incentive for such a term, whether in the form of discounted pricing or lack of rate increases. A full 61% of firms increase prices yearly (on average by about 3-7%). Be sure to look at all of the options available to lock in the best prices.
3PL Costs as a Percentage of Gross Product Sales
Sometimes, we get asked what the average fulfillment costs are as a percentage of gross sales. This is a very difficult question to answer. For example, let’s say that your average fully loaded fulfillment costs are $8 per order. For a product with a gross sales price of $50, the fulfillment costs are a whopping 16% of sales. However, if the gross sales price of the product is $110, then the fulfillment cost is slightly over 7%. Due to the fluctuations in product prices, we would not suggest taking the fulfillment costs as a percentage of gross sales analysis too serious. However, for those of you that are determined to explore this angle, studies have shown that the most efficient companies are operating at between 8-10%, whereas the average seems to be around 10-15%, with the lower end of companies without as much automation operating at around 20% of gross sales.
But Set-up, Receiving, Storage, Order Fulfillment and Shipping Fees Aren’t All You’ll Encounter: A Detailed Breakdown of All Potential Fulfillment Charges
Below is a listing of all of the potential fees that you will encounter with a fulfillment service:
- Set Up Fees – Account Set Up and System Integration (this is the cost of setting up your account)
- Inbound Shipping – Freight or Container Shipping (this is the cost to send your product from supplier/manufacturer to the fulfillment center)
- Receiving (this is the cost of receiving your product into inventory, inspecting it, counting it, and placing it in the warehouse)
- Storage and Warehousing (this is the cost of storing your product in the warehouse on pallets, the floor, or bins)
- Pick and Pack and Order Fulfillment (this is the cost of physically going to the warehouse to pick, package, and prepare the order for shipment)
- Box Fees – Standard or Custom Packaging (this is the cost of any additional packaging or boxes used to prepare your orders for shipment)
- Order Insert Fees & Custom Labeling (this is the cost of adding any promotional or marketing inserts into the package, or labeling the package in any special way)
- Outbound Shipping (this is the cost of shipping your product from the warehouse to the end customer)
- Returns Fees (this is the cost of receiving and returned product, inspecting it, and either returning it to inventory or disposing of it)
- Kitting Fees (this is the cost of any special kitting or assembly projects in order to prepare your products for shipment – these are usually quoted out on a time and cost basis. E.g. if it takes 30 seconds to kit each unit, and the warehouse charges on a cost basis of $40 per hour, then the per kit cost would be $.3333)
- Account Management Fees (this is the cost of any customer service work or overall company management that the fulfillment firm provides for your account and can include the monthly cost of system integration and online reporting)
An Example Fulfillment Proposal to Give You a Feel for a Monthly Bill
Below is a sample fulfillment pricing proposal. If you were to go to a fulfillment center today and ask for a quote, this is very similar to what you would receive from them. We’ve included all of the average costs from our most recent warehouse survey.
|Fulfillment Cost Type||Fulfillment Pricing Fee per Unit|
|Set Up Fee||$336-575 on average and ranges from $0 to thousands; $150-$450 on average for web store integration and is usually included in the total set up fee|
|Inbound Shipping Fee||Discount off of negotiated rates with carriers|
|Receiving Fee||$36.09 per hour OR $330 per 20 foot container/$441 per 40 foot container OR $2.91 per box OR $10.10 per pallet OR $.25 per item OR $2.58 per SKU|
|Storage Fee||$14.79 per pallet OR $.45 per cubic foot OR $4.07 per bin OR $.75 per square foot|
|Fulfillment Fee||$2.70 per order PLUS $.40 per order (discounted for higher volume or orders but the average is $3.13 per single item order) & $4.27 per B2B order|
|Box Fee||$.45 per box (some companies include this in fulfillment fees, in which case you might see a slightly larger fulfillment fee and the range was $.25-$1.17 on average)|
|Order Inserts||$.15 per insert OR $.05 per label|
|Outbound Shipping Fee||Discount off of negotiated rates with carriers (e.g. 19.28% off of ground, 25.06% off of express, 24.18% off of international and 56.4% off LTL)|
|Returns Fee||$4.50 per order PLUS $.50 per additional item ($5.28 for a single item return)|
|Kitting Fee||$35.47 per hour or custom quoted rated per order/item based on time study ($.30-$.63 for a simple project per unit)|
|Account Management Fee||$160.10 per month and ranges from $50-$1,000 per month depending upon complexity|
Look For These Keys When Comparing 3PL Fulfillment Costs and Pricing
One of the most important things for you to research when it comes to choosing a fulfillment company is how their fulfillment pricing and costs and their system works. This way you can choose the best options for your business plan and be able to budget accordingly.
We wish it weren’t the case, but unfortunately most 3PL companies aren’t fully transparent and straightforward when it comes to 3PL pricing. Fortunately, we’ve compiled a list of a handful of things to watch out for when comparing the rates of different companies.
The following is a list of helpful fulfillment pricing tips to help you be able to make an informed decision.
Make Sure There are no Hidden Fees or Confusing Charges
Read through all pricing documentation to verify what fees will apply to you and ensure they are legitimate for the type of business needs you have currently and what needs you will have in the future. Asking questions now can save you from confusion later. Be sure to ask the provider if they are giving you a proposal that includes ALL prices that you might see using their services.
We help many companies each month that ended up choosing a fulfillment company only to find that once they starting using the services, their bill was much higher than anticipated. Come to find out, they weren’t shown every price they might potentially incur. So when they got their invoice, which was a mile long, all of these miscellaneous charges added up to a hefty bill. Make sure that you have each company provide you a complete listing of all 3PL pricing.
Ensure Storage and Order Fulfillment Charges Match Your Company Needs
Be sure to check into any limitations regarding storage and order fulfillment to confirm the fulfillment company can handle your expected output and also your inventory needs. Include projections for varying needs throughout the year.
Check Into Fees for Returns, International Orders, Packaging and Other Fees
Verify fulfillment costs for normal customer returns, international orders, and other variables that may be exceptions to the majority of your standard business transactions. Do their fees include boxes and other packaging needed to ship your orders? Make sure there aren’t any details left unexplained.
Verify Shipping Options and Customization Options
It is important to know in advance if you may need different shipping options for time limitations. Also, customization such as wrapping, custom packing materials, custom packing slips, and extras to be included (catalogs, business flyers, ads, etc.).
Ask For Any Volume and Contract Discounts
Sometimes, fulfillment companies will offer volume discounts or contract discounts. Be sure to ask if these apply, as they can add cost savings for your company. In our latest survey, we found that 54% of fulfillment companies offer yearly contracts and 45% offer multi-year agreements. Locking into a longer contract can reduce your costs. Similarly, 70% of fulfillment houses offer discounts for pick and pack fees at different monthly volumes levels, and 62% of warehouses offer discounts depending upon the storage space needed (the more, the higher the discount). It pays to make sure you realize any potential savings from contract length and volume.
Make Sure You’re Comparing Each Companies’ Total Costs
When you’re comparing between multiple fulfillment companies, one of the best ‘hacks’ is to ask each provider to give you a full month invoice based upon either your full projections or one of your most recent month’s performance (using your historical data). This way, they will have to provide you an “all inclusive” quote, and you can compare the total values from each provider. If you can’t do this, then at least make sure that you’re incorporating all costs from each provider and coming up with a projected total, rather than comparing any single line item. Factoring for all costs will help you make the best decision.
One of the biggest challenges in comparing warehousing companies is that every company uses their own pricing models. Most companies have a laundry list of potential charges that you can incur each month – and none of them are the same from company to company. So comparing pricing is like comparing apples to oranges. The best way to perform an adequate analysis is to have each organization provide you with a “what if” analysis – what would your total costs with them be if you were to have a certain number of orders and storage per month. This will help you get to the bottom of actual costs. However, you still need to be aware of these other potential pitfalls to avoid.
Standardize Your Proposals in Order to Compare Various Pricing Schemes
It would be extremely easy to compare different options if all companies presented their pricing the same way. Unfortunately, almost all companies will use different pricing models. This makes it almost impossible to do an “apples to apples” comparison. We recommend that you take the power back by asking each 3PL company to provide you a “what if” analysis. Basically, in addition to their proposal, ask them to provide you with a mock invoice using certain assumptions about an average month for your business. This way, you’ll get a fully loaded price from each of the vendors, which makes comparison shopping easy.
Be Aware of the Most Common Deceptive Tactic
We’ve seen it happen all too often – a 3PL firm provides a company a quote with only a couple of fees – all of which are extremely low versus the competition. This is what we refer to in the industry as the “shell game.” Many times 3PL’s will try to gain a pricing advantage by giving you a couple of low rates (especially pick and pack fees), only to later charge you much higher rates in other areas after you commit to working with them. One of the most common areas where they hide fees are in the difficult to measure shipping costs. Ask for specific 3PL pricing to uncover any discrepancies.
A good understanding of pricing structure will help save you from concerns in the future. Analyze current business needs and try to project future business needs to account for possible changes in fulfillment pricing structure based on volume. Feel free to ask our experts for additional guidance and answers.
The Most Commonly Overlooked Cost Savings of Using a 3PL Provider
Often, people automatically think that controlling every area of their business is the best way to save money. If you want it done cost effectively you do it yourself, right? That’s not always true. In fact, by outsourcing your warehousing and shipping to a 3PL company, you can save a substantial amount of money. Where most companies make the mistake in the analysis is by failing to look at all of the costs and benefits – missing out on important considerations because they’re not on top of mind. But by factoring for every cost component, 3PL outsourcing really does provide an effective way to eliminate the headache of performing the storage and shipping while at the same time saving you money.
Expansion and Retraction of Warehouse Space
Many businesses often find that one part of the year business booms, then other times of the year orders just trickle in. If you invest in your own warehouse space, you may find that you have too little or too much warehouse, depending on the time of the year. Paying for a warehouse that doesn’t fit your needs year-round is a waste of money. 3PL providers can scale to meet your current needs. Furthermore, when you lease the warehouse yourself, your business (and most likely “you” as the small business owner through a “personal guarantee”) is on the hook for fulfilling the agreement. By outsourcing, this risk is avoided.
Warehouse Supplies Costs
Most frequently, when comparing the costs of outsourcing warehousing versus in house operations, companies do a fairly good job of anticipating hard costs associated with cartons and other packaging materials. However, frequently companies forget to consider other warehouse supplies costs that, when totaled over a year, can amount to a sizeable amount of money. For example, some of the more commonly forgotten supplies costs include: shrink wrapping, warehouse computers and other equipment, software programs, paper and labels, and many others. These costs can easily add up to $2,000 to $5,000 per year, and can cause faulty conclusions if unaccounted for in the analysis.
Terms Provided by 3PL Companies
When you run your own warehouse, you’re responsible for directly paying these costs. Some of these costs, such as labor for employees, has to be paid quite frequently – oftentimes every two weeks. However, many 3PL firms will grant you “terms” on their 3PL fulfillment agreement, oftentimes invoicing you monthly and giving you a certain period of time to pay your bill. These terms help improve your cash flow cycle, and by paying one company for all of the costs associated with warehousing, your payables management process is streamlined.
Opportunity Costs for Management
Of all of the costs in an in house versus outsourcing analysis, owner and management “time” related to warehouse and shipping management is typically the most under-represented. Usually, businesses forget to incorporate the time spent managing the process, or they simply under-estimate the total actual time spent. And this cost can be quite significant, considering that managers and owners are the highest paid members of the team most likely. So in order to make it a completely “fair” analysis, it’s important to get an accurate estimate for the amount of time that is spent by management on the warehouse function. Furthermore, figure out how much value could be derived if this time was spent on a more “value” producing activity, such as sales and marketing. This isn’t meant to minimize the importance of the shipping function, but it is a more easily outsourced function, which then allows management to spent time in other areas.
As you can see, there are many ways going with a 3PL provider can save you money, short-term and long-term. Before you sign a warehouse lease, make sure you’re not passing up a great opportunity by going with a 3PL provider instead.
Top Ways to Cut Costs in Fulfillment: For In-House and Outsourced Services
Staying within a budget is likely a fact of life for your business, despite maybe overstepping those boundaries on occasion. Part of this might relate to an important business aspect: Fulfillment.
If you’re doing fulfillment services in-house, the costs are no doubt already overwhelming. It’s not a recommended process if you’re still a small business that needs some help to grow.
Then again, maybe you’ve reached a point where your company is large enough now to handle some fulfillment duties. Do you know how to keep your expenses in check so they don’t run out of control and create financial jeopardy?
Even if you outsource your fulfillment to a third-party warehouse, expenses could still balloon if you don’t pay attention to what they’re doing. In this case, staying closely communicated with the fulfillment center is imperative to know exactly what your expenses are.
Here’s top ways to cut costs in fulfillment for both in-house and outsourced situations.
Start With an Audit
No matter if you do fulfillment in-house or outsourcing to a fulfillment center, you need to start with an audit to see where you could cut expenses. Auditing helps better determine what your business needs are so you see where to cut if you’re spending more money than necessary.
What you needed last year is perhaps different this year, meaning any tech you invested in then could maybe become eliminated now to save money.
Areas where you could cut or reorganize in-house or in a warehouse include direct and indirect labor, outbound and inbound freight, occupancy, and packing materials.
Your Receiving Costs
This is another cost usually associated with working with 3PL warehouses. Accepting and verifying deliveries of your inventory is a typical process in warehousing, though they’re going to charge you a fee for the service. The problem is, the fee is perhaps higher than you’re willing to spend.
It’s all the more reason to vet a fulfillment center before you start to work with them to compare their receiving fees.
Using Shared Space
A shared space warehouse can cut costs considerably, especially if your own in-house fulfillment is becoming impossible due to lack of space. Some fulfillment centers offer shared space warehouses to accommodate more than one client.
Doing so eliminates having to lease out space on your own to accommodate your growth. The shared space service also cuts costs considerably since you’re sharing costs with others. At the same time, you’re getting a warehouse that keeps you up on the latest fulfillment changes.
More Advanced Technology
Not all state-of-the-art technology is expensive, though the investment can save you money in helping to speed up deliveries. However, using advanced tech through an outsourced fulfillment center saves you on overhead investments.
Many warehouses that outsource give you a fixed rate while you still enjoy the latest technology to assure your customers get deliveries sooner than later.
Using What You Have in a More Productive Way
Sometimes you can save money by just being more productive with the things you already own on-site. It’s possible to do the same with a warehouse you partner with year-round.
By getting as much productivity out of what you already own, you’ll come out ahead, though you need to look carefully at various things. Areas like effective product replenishment, slotting practices for picking, efficient inventory management, quality assurance, and automation systems are just some things to streamline for savings.
Automation is a growing area in many industrial areas, and it reduces your work force costs while placing less burdens on existing warehouse staff.
A Comparison of Costs of In-House Fulfillment Versus Outsourced Fulfillment
In order to truly compare if outsourced warehousing and fulfillment is the best solution, you’ll have to compare all of the costs of outsourcing with in-house costs. Below is a listing of all of the costs that you should consider if you’re looking at performing fulfillment in-house:
- Labor (This is the cost of any staff that will be used in the warehouse – including receiving orders, inventory management, order fulfillment and shipping. Even if the business owner is going to be performing these functions, it is important to include them in the overall cost analysis in order to get a fair representation of true in house costs.)
- Rent (This is the cost of actually renting a warehouse space. While in house operations will allow for greater control over the process, one of the main drawbacks is that your company will be hampered by the fixed cost of leasing a space.)
- Utilities (Just like owning or renting a personal living space, running a warehouse space will require certain utilities, such as electric and water.)
- Insurance (If you lease a warehouse space, you’ll be required to obtain insurance for any accidents or catastrophes that occur.)
- Supplies (This is the cost of any materials needed to run the warehouse, such as shrink wrap, cartons, carton fill, etc.)
- Shipping (This is the cost of actually shipping your packages or goods, either by small parcel carriers such as FedEx and UPS, or by LTL or Truckload carriers.)
- Customer Service (Some time will no doubt be needed to answer email and phone calls presented by your customers, and this line item attempts to budget for the expense of managing your customer base.)
- Management Time (Many companies, when conducting this analysis, forget to factor for this “soft” cost. However, there is usually a good amount of time spent by the owner or other managers in consulting with the warehousing division of the company. These costs can add up quickly, but if unaccounted for, will not adequately reflect the true cost of in house fulfillment.
- Software (This is the cost of any software needed to perform inventory control and shipping.)
If you want some ideas of what these actual costs will run, take a look at our fulfillment cost calculator.
Fulfillment Costs and Pricing Survey Results
Each year, insightQuote conducts its annual warehousing and fulfillment company survey to uncover information about the average costs and pricing of its database of pre-screened warehousing vendors. Frequently, users of our service and participating vendors alike ask us questions about what warehouses charge on average for their service, as well as what their baseline costs structures average. We were interested in learning more about some of the more common costs and prices with the industry, especially as it pertains to the small to mid-sized fulfillment provider. Each warehouse that participates in our warehousing services platform was sent an email survey with five questions related to costs and pricing. For 2016, the questions were as follows:
- What is your yearly cost per square foot of your warehouse space (triple net) (e.g. $10 per square foot per year)?
- What is your starting hourly rate of your warehouse staff (e.g. $8 per hour)?
- What is your annual pay for a warehouse management employee (or hourly if applicable)?
- For an average customer, what do you charge for pick and pack per order (order fulfillment fees – e.g. $2.50 per order)?
- For an average customer, what do you charge for monthly storage (e.g. $10 per pallet per month)?
In 2017, we added the following questions:
- What is your average pick and pack price for a business to business order?
- How do you charge your customers for storage?
- How do you charge for shipping?
- What is your corporate profit?
In 2018/2019, we added a few more questions:
- What is your average set up fee charged to a new client?
- What is your average monthly account management fee?
- What is your average receiving fee?
- What is your average returns fee?
In 2020, we added another set of questions to make our survey more comprehensive:
- Do you charge carton fees or are they rolled into your fulfillment fees and if you charge separately what is the cost?
- What kind of premium is charged for climate controlled storage?
- How much do you charge for kitting services?
- How much do you charge for inbound call center services, if offered?
In 2021, we kept that same set of questions as we posed in 2020.
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. Unreasonably high or low answers to our survey questions could have been a result of misunderstandings related to the question. 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, Canada and Europe. 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.
What is your yearly cost per square foot of your warehouse space (triple net) (e.g. $10 per square foot per year)?
2016 Average = $9.24 & 2017 Average = $6.53 & 2018/2019 Average = $7.79 & 2020 Average = $7.81 & 2021 Average = $7.91
For 2016, the average yearly cost per square foot of warehouse space across all respondents was $9.24. The median response was $7. The mode of all results (most frequent response) was tied between $5 and $6. The range of the results was 14.5, with responses ranging from $1.5 to $16. A couple of the warehouse respondents reported that they owned the facility outright. While we don’t know which responses were associated with which locations, we do know some respondents indicated that they paid different costs in different areas of the country in cases where they had multiple warehouses facilities, which wouldn’t be a surprise, as some areas are inherently more expensive than others.
In 2017, the average cost per square foot of storage space dropped quite a bit from the previous year to $6.53. This is a result of a much larger sample size that we collected in 2017 versus 2016.
In 2018/2019, costs climbed to $7.79 per square foot, largely as a result of the hot commercial real estate market due to e-commerce fulfillment growth.
Costs only increased in 2002, with the cost per square foot of commercial warehouse space on average climbing slightly to $7.81 per square foot.
There was a modest price per square foot increase in 2021 to $7.91.
What is your starting hourly rate of your warehouse staff (e.g. $8 per hour)?
2016 Average = $11.54 & 2017 Average = $11.44 & 2018/2019 Average = $13.32 & 2020 Average = $13.47 & 2021 Average = $14.00
For 2016, the average starting hourly rate of a warehouse staff member was $11.54. Both the median response and the mode of all results was $10. The range of all results was $13. The lowest rate reported was $8, and the highest rate reported was $21, though at least one respondent reported that they may offer as high as $25 for a starting team member. On multiple occasions, respondents reported that they also offered additional benefits, such as medical and dental benefits.
In 2017, the average dropped just slightly by $.10 to $11.44.
In 2018/2019, the industry saw a sharp increase in hourly wages to $13.32. The cost of labor is increasing, as companies have struggled to find quality labor without increasing costs.
The average hourly rate of a warehouse worker rose in 2020 to $13.47. Labor costs jumped sharply in 2021 to $14.00 per hour.
What is your annual pay for a warehouse management employee (or hourly if applicable)?
2016 Average = $32,050/year & 2017 Average = $47,478/year & 2018/2019 Average = $50,524 & 2020 Average = $52,765 2021 & 2021 Average = $55,855
For this particular question in 2016, as mentioned previously, we had some respondents (21%) report that they pay warehouse management staff on an hourly basis, ranging from $12 to $34 per hour, with an average of $18.04. The average annual pay for warehouse management staff expressed across all respondents on an annual basis was $32,050. The median and mode were both $40,000, with a range of $53,000. The lowest rate reported with $21,000, with the highest reported salary was $74,000.
In 2017, once again we see that the average changed significantly, most likely as a result of the larger sample size of warehouses that responded to our survey.
In 2018/2019, it was no surprise to see that costs of management staff increased to $50,524.
2020 warehouse management yearly salaries rose to a peak of $52,765. The increase continued in 2021, with average management staff salaries increasing to $55,855.
For an average customer, what do you charge for pick and pack per order (order fulfillment fees – e.g. $2.50 per order)?
2016 Average = $2.84 & 2017 Average = $2.64 B2C and $3.74 B2B & 2018/2019 Average = $2.86 B2C and $4.17 B2B & 2020 Average = $2.96 B2C and $4.27 B2B & 2021 Average = $3.13 B2C and $4.27 B2B
One of the most common notes from respondents on this particular question was that the order fulfillment fees varied based upon order volume. Therefore, we had to make some assumptions, factoring by averaging in cases where respondents provided ranges. Furthermore, some respondents indicated that the average prices included warehouse provided packaging. Finally, our assumption is that the order fees were for a single item shipped, although some indicated that the order fees presented included up to a few items (2-3). For 2016, the average pick and pack per order fees was $2.84. The median result was $2.85, with the mode being a tie between $2.5 and $3.5. The range was $5.5, with the low response of $1 and the highest response of $6.5.
In 2017, the average pick and pack price for a single item order dropped slightly to $2.64. With market pressures on providing low rates and new technology and innovation, fulfillment companies have to come in at the most competitive fulfillment pricing in order to win deals. Business to business orders are usually more complex, so it’s no surprise that the average B2B order came in at $3.74 to prepare for shipment.
Largely as a result of increasing costs, we found in our 2018/2019 survey that warehouses had to increase order fulfillment (pick and pack) fees to $2.86 per single item B2C order and $4.17 per single item B2B order.
With all major warehousing costs increasing in 2020, it stands to reason that the 2020 average pick and pack fulfillment prices rose to $2.96 per single item B2C order and $4.27 per single item B2B order. And buyer beware – some fulfillment companies roll box fees into their pick and pack fees and some don’t. For those that don’t, they charge on average $.25-$1.50 per box, depending upon the size, etc.
The survey results in 2021 continued the streak of increases, with B2C pick and pack fulfillment fees per order jumping to $3.13. However, the lone stat that remained the same was B2B fulfillment fees, which stayed put at $4.27 per order. Average box fees didn’t move much either.
For an average customer, what do you charge for monthly storage (e.g. $10 per pallet per month)?
2016 Average = $9.62 & 2017 Average = $13.02 & 2018/2019 Average = $13.20 & 2020 Average = $14. 58 & 2021 Average = $14.79
In 2016, the average monthly storage charge of all respondents was $9.62. Both the median and the mode were $10. The range was $24.5, with the lowest response being 3.5 and the highest being $28.
For 2017, once again due to the larger sample size, the average price to store a pallet in a 3PL warehouse according to our survey change quite a bit – increasing to $13.02. This cost is better taken into account using a range, which we believe to be from $6-$15 per pallet. Geography will impact this greatly. For example, a warehouse in the middle of Kansas will be able to obtain warehousing space more cost effectively than a warehouse near Los Angeles.
It should come as no surprise that due to the commercial real estate market lease increases, warehouses had to increase their storage fees slights from $13.02 in 2017 to $13.20 in 2018/2019.
In 2020, pallet storage pricing rose sharply to $14.58 per pallet, in what appears to be an increase directly related to the slow and methodical death of brick and mortar retail and shift towards e-commerce retail and the corresponding demand for warehouse space. Furthermore, insightQuote uncovered that there is a premium upwards of 173% for climate controlled warehouse space, with pallet storage fees ranging from $16-23 per pallet per month. 2021 pricing increased slightly for pallet storage of dry goods to $14.79 per pallet.
How do you charge your customers for storage?
2017 Response = 79.49% Pallet Storage, 35.90% Per Cubic Foot, 23.08 Per Square Foot, 30.77% Per Bin
The vast majority use pallet storage (almost 80%), but other methods are used, such as cubic footage, square footage, and storage per bin. In terms of the average costs, in 2017 it was $13.02 per pallet, $.54 per cubic foot, $2.13 per bin, and $.88 per square foot.
2018/2019 Response = 90.24% Pallet Storage, 12.20% Per Cubic Foot, 24.39 Per Square Foot, 26.83% Per Bin
Clearly, companies chose to focus more on the pallet storage methodology in 2018/2019. In terms of the average costs, in 2018/2019 it was $13.20 per pallet, $.55 per cubic foot, $2.85 per bin and $.66 per square foot.
2020 Response = 95% Pallet Storage, 31% Per Cubic Foot, 27% Per Square Foot, 25% Per Bin
In 2020, pallet storage and cubic footage pricing methodologies grew in popularity and use. In terms of the average costs, in 2020 it was $14.58 per pallet, $.495 per cubic foot, $3.30 per bin and $.77 per square foot.
2021 Response = 93% Pallet Storage, 27% Per Cubic Foot, 15% Per Square Foot, 30% Per Bin
In 2021, storage fees averaged $14.79 per pallet, $4.07 per bin, $.75 per square foot, $.45 per cubic foot, and $5.11 per shelf.
How do you charge for shipping?
2017 Average = Discount off of Published Rates 41.03%, Cost Plus 30.77%, No Discount 10.26%, and Customers Use Their Own Rates 38.46%
Yet another new question for our 2017 survey, we wanted to see what method was most used. It was no surprise to see that discount off of published rates was the most common at 41.03%. What was surprising was that 38.46% used their customers’ account for shipping. In terms of total discounts given off of published rates, the averages were 24% for ground, 31% for express, and 44% for LTL.
2018/2019 Average = Discount off of Published Rates 31.71%, Cost Plus 41.46%, No Discount 14.63%, and Customers Use Their Own Rates 43.90%
In terms of total discounts given off of published rates, the averages were 20.2% for ground, 29% for express, and 51% for LTL.
2020 Average = Discount off of Published Rates 32%, Cost Plus 45%, No Discount 7%, and Customers Use Their Own Rates 36%
In 2020, cost plus shipping prices grew in popularity, fewer warehouses allowed companies to use their own rates and shipping discounts increased in usage. In terms of total discounts given off of published rates, the averages were 13% for ground, 20% for express, and 57% for LTL.
2021 Average = Discount off of Published Rates 37%, Cost Plus 64%, No Discount 9%, and Customers Use Their Own Rates 39%
In 2021, cost plus shipping prices grew in popularity even further, more warehouses allowed companies to use their own rates and shipping discounts increased in usage. In terms of total discounts given off of published rates, the averages were 20% for ground, 25% for express, and 56% for LTL.
What is your corporate profit?
2017 Average = 8.83% & 2018/2019 Average = 7.25% & 2020 Average = 9.77% & 2021 Average = 11%
This is a new question that we asked in 2017. In particular, this is a very interesting question that sheds some light into the industry as a whole – profit margins are definitely lower in this industry than many. Warehouses have to operate on thin margins, and rather rely upon volume to make overall corporate profit. For 2017, the average corporate profit was 8.83%, but a great frequency operated closer to the 5% level. Due to costs rising in 2018 and 2019, corporate profit fell to 7.25%. And after warehousing and fulfillment companies largely increased pricing across the board, corporate profits spiked to an all-time insightQuote survey high of 9.77%. With the pandemic fueling e-commerce fulfillment growth, it comes as little surprise that corporate profits soared to 11% in 2021.
What is your average Set up fee, Account management fee, Receiving fee, and Returns fee?
This is a new question we asked in 2018/2019. Average set up fee was $336, but ranged from $100 per month up to thousands per month. Average account management fee was $226, but ranged from $100 to $1,000 per month. Average receiving fees were dependent upon the methodology used ($.25 unit; $7 pallet; $31.95 hour; $373.33 container; $1.21 carton). Finally, average returns fees were $3.53 per single item order.
In 2020, set up fees increased from $336 on average to $520. Surprisingly, average account management fees fell to $130 per month. Receiving charges increased across the board ($7.65 per pallet; $35.30 per hour; $465 per container; $1.50 per carton; and $6.30 per SKU). Returns fees, on average, increased to $4.05 per order.
In 2021, set up fees increased further to $550. Account management fees rose to $160 per month. Receiving fees were as follows: Per container $441, per hour $36.09, per SKU $2.58, per carton $2.91, per pallet $10.10. Returns fees jumped to $5.28 per order.
What is your average charge for Kitting services and inbound Call Center services?
For the first time, in 2020 we asked warehouses what they charged for kitting services and call center services (if offered). The average hourly rate for kitting services was $35.75 per hour and the average inbound call center charge was $1.05 per minute. In 2021, kitting fees rose to $35.47 per hour and inbound call center charges per minute dropped significantly to $.85 per minute.
InsightQuote’s 2021 Fulfillment Costs and Pricing Annual Survey Results
WarehousingAndFulfillment.com, the preeminent name in fulfillment matchmaking services, is pleased to announce the results of our 2021 Warehousing and Fulfillment Pricing and Costs Survey. From year to year, FulfillmentCompanies.net tracks key industry data with an eye towards the future of warehousing, logistics, and 3PL. This year’s survey results identified a strong correlation between price-per-square-foot leased and profits. As in past years, the cost of running a warehouse rose slightly from $7.81 to $7.91 per-square-foot. However, corporate profit margins remained in lockstep with costs, rising from 9.77% to 11% in 2021.
In a year fraught with upheaval and uncertainty, the industry persisted, maintaining a reasonable level of growth and progress.
About the Annual Warehousing and Fulfillment Costs Survey
Every year, FulfillmentCompanies.net engages our vast network of the best fulfillment companies and warehousing partners regarding the state of industry costs and pricing. For the 2021 survey, we interviewed more than 600 strategic partners, and we are pleased to announce that we had a record number of responses this year.
For the sake of confidentiality, we do not record individual warehouse names alongside their respective responses. To gain the wealth of data we did while ensuring fidelity to the resulting metrics, we examined all responses considered to be significant outliers and only included results that fell within a predetermined range of averages. It should be noted that our area of focus is North America, with 94% of respondents being in the United States, with the remainder located in Canada.
Key Metrics Identified Within the Survey
The year we’ve seen a nationwide surge in e-commerce fulfillment. A record amount of products flowed through distribution centers. This surge has in turn put additional stress on warehousing, logistics, and distribution-related jobs, causing warehousing costs and prices to rise steadily alongside.
In terms of warehousing cost increases, the following metrics are especially notable.
Warehousing Costs Rose Consistently
- The square-foot cost to lease storage space rose to $7.91
- The average hourly rate of frontline warehouse staff rose from $13.47 to $14.00
- The average yearly salary for managerial staff rose from $52,765 to $55,854
As costs rose for warehouse owners, so did the prices they charge for their logistical expertise. Over the past year, we saw those prices increase in proportion to costs incurred by the warehouse. Interestingly, while less companies overall raised their prices, those that did increased them at a more aggressive rate than in previous years.
Fulfillment Prices Showed Mixed Results
- 61% of respondents increased their prices regularly (-8% from previous year)
- Those who increased prices did so by 5.59% (+2.29% from previous year)
- Pick and pack rates rose slightly from $2.96 to $3.13 for D2C
- B2B order costs remained static at $4.27 for a single item
Through this year’s survey we were also able to glean significant information about industry-wide storage fees and common practices.
Storage Fees Showed Modest Increases
- 93% of warehouses charge storage by the pallet
- The average cost was $14.79/ pallet or $0.45/ cubic foot
- Climate controlled storage averaged $17.99/ pallet, $0.64/ cubic foot
- 49% of respondents offer discounts based on bulk storage needs
Finally, the survey was useful in identifying common shipping prices and trends across the industry as well.
Shipping Discounts and Other Miscellaneous Fees Increased
- 64% of respondents offer a cost-plus pricing model while 37% offer discounted rates
- Those who offered discounts averaged a 19.28% reduction off the published rate
- For international customers, that discount rose to 24.18%
- 95% charge return fees of product with the average being $5.28/ return
- 95% also charge receiving fees which ranged from $441/ container to $2.58/ SKU
The Future of the Warehouse Fulfillment Industry
Despite a turbulent year which featured explosive ecommerce volume, costs and prices rose steadily in proportion to one another as they have in past years. As new technology comes to market and the ecommerce channel continues to flourish, expect rapid change to continue in subsequent years. Until next year’s survey, FulfillmentCompanies.net will continue to analyze the information gained from our extensive network of warehousing partners in order to bring actionable data to help you streamline your company’s logistics.
2020 Survey Reveals Demand is Steadily Increasing and Profits are Up in the Warehousing and Fulfillment Industry
WarehousingAndFulfillment.com, a leader in fulfillment matchmaking services, recently released its 2020 Warehousing and Fulfillment Pricing and Costs Survey. Results revealed that while the cost of running a warehouse is steadily increasing, profits are also rising. The cost of leasing warehouse space in 2019 was $7.79 per-square-foot, and profits were 7.25 percent. Costs rose steadily to $7.81 per-square-foot in the 2020 survey. However, profits took a jump to 9.77 percent. Increases in fulfillment costs and pricing across the board are helping the industry maintain steady profits.
About the Annual Warehousing and Fulfillment Costs and Pricing Survey
This year’s survey had record response rates from the best fulfillment companies – more than 600 warehouses within the company’s network. Respondents were largely single location regional fulfillment companies who were surveyed confidentially. Specific warehouses were not recorded alongside responses nor were their geographic locations noted. To accommodate for entry errors or misunderstandings related to the questions, researchers did not include responses that fell far outside the averages outlined. When respondents used various formats for a single question, researchers chose to use the most common format.
Key Findings in Our Annual Survey
Demand for warehousing and fulfillment services is steadily increasing, mainly due to the popularity of e-commerce fulfillment services. In order to keep up with demand, warehouses are spending more on labor and leases. Across the board, researchers found warehousing and fulfillment companies are increasing their pricing to accommodate for demand. As a result, the industry has been able to increase profits. Consider these highlights from the survey.
Warehousing Costs Increase
- The cost-per-square-foot to lease warehouse space averaged $7.81.
- The average starting hourly rate of warehouse staff is $13.47 per hour.
- Warehouse managers make $52,765 per year on average.
Fulfillment Prices are Up
- 69 percent of respondents increase pricing on a regular basis.
- Of those that increase rates, 92 percent increase pricing annually, while 8 percent do it every two or more years.
- 3.3 percent is the average price increase year-to-year.
- The average pick and pack charge for a single item B2C order is $2.96, slightly up from $2.86 in 2019.
- The average pick and pack charge for a single item B2B order is $4.27, slightly up from $4.17 in 2019.
Warehouse Profits are Positive
Corporate profit in the last three surveys is as follows:
- 2017: 8.83 percent
- 2018-2019: 7.25 percent
- 2020: 9.77 percent
3PL Industry Fee Trends
In addition to pick and pack fees, respondents revealed average increases in various other fee categories too. For example, storage fees were $13.20 per pallet and $2.85 per bin in 2019. In 2020, these increased to $14.58 per pallet and $3.3 per bin. For the 56 percent of respondents that charge a setup fee, the average jumped from just $336 for new clients in 2019 to $520 in 2020. Returns fees also trended upward to $4.05 per order, from $3.53 in 2019. Receiving fees on the whole increased, averaging as follows:
- $35.3 per hour
- $330.20 per 20-foot container/$465 per 40-foot container
- $1.5 per carton
- $7.65 per pallet
Performance Tracking within the Fulfillment Industry
Today’s warehousing and fulfillment companies know the importance of measuring performance to gauge success. Ninety-three percent consistently measure key performance indicators, including these most popular KPIs.
- Order picking accuracy (99.31 percent)
- Inventory shrinkage rate (2.84 percent)
- Percent of customers retained each year (94.59 percent)
Understanding the Warehouse Fulfillment Industry
In a competitive environment, it’s critical that warehousing and fulfillment companies understand the industry. To assist them, FulfillmentCompanies.net updates this survey each year and continues to add questions that will bring about new insights. For example, new questions this year asked about charges for inbound call center services, kitting services, carton fees, and subscription box orders. And because local fulfillment services are vital, FulfillmentCompanies.net will continue to drill in on local data to provide help for searches interested in exploring “fulfillment companies near me” scenarios.
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Ultimately, this is one of the biggest reasons that we exist – to help you answer questions about the different alternatives and to get you FREE price quotes from multiple 3PL companies so that you can make the best decision for your organization.