Understanding how your storage fees are calculated – by square foot, pallet or SKU

Thinking about outsourcing your warehousing but need to work out the costs?

More businesses than ever are using third party logistics providers to move, store and deliver their goods. As more 3PLs enter the market, comparing the deals offered by competing companies becomes more important. The trouble is, you have an apples-to-oranges situation. Each potential logistics partner offers a different suite of services and there are at least three major pricing formats in use.

In an effort to make businesses who are just entering the market for a good 3PL better able to make the best choices, we will look at three of the more common goods storage fee calculation systems, and what they mean for you.

costing of warehouse storage

Warehouse Pricing by the Square Foot

Warehousing is generally priced by the square foot, meaning that you pay for the area of warehouse space your goods occupy. Let’s say that, when palletised, 100 of your widgets takes up a space of four feet by four feet. Multiply the length by the width to get 16 square feet.

You’ll be paying that square foot rate for each 100 widgets in inventory. Remember to check if they round up the nearest foot or nearest pallet. That can make a huge difference, especially if they track the storage space dedicated to each of your SKUs separately.

Pricing by the SKU

It is rare to see SKUs used as the sole method of charging for space. More commonly, you may pay both by volume (usually by the square foot) and again per SKU. You might pay £2 per month for each SKU you stock and another £2 per square foot that all of your SKUs add up to.

Pricing by the Pallet

Some fulfilment houses simply charge you for each pallet of goods stored there. This is a lot simpler to calculate, but could again cost a lot more if you have a dozen half-empty pallets of differing SKUs awaiting pick-and pack. A pallet might be 48 inches square, or 16 square feet.

Make sure to check if they round up to the next whole pallet, and if they will consider 4 different ¼-full pallets of individual SKUs to be one pallet of four.

Other factors to consider

  • Is the price for end of the month count, or average daily volume over the month?
  • Is a low (or high) storage cost offset or amplified by a low or high per order fulfilment charge?

 


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