How Can I Calculate 3PL Cost?
While there’s a wide range of underlining factors that you must look at when choosing the right fulfillment company, cost ranks as one of the most important. As a matter of fact, 3PL companies can vary a lot when it comes to their order fulfillment cost. Equally important, you need to know the pricing of your third-party-logistics (3PL) company.
Some orders can be simple, other orders may be complex, order fulfillment cost calculations are important for you and your business in determining which fulfillment center service to go with.
In this article, we’re going to cover the 4 most common order fulfillment costs sellers will come to face outsourcing their fulfillment.
Primary Order Fulfillment Cost
It’s not uncommon for small businesses and ecommerce sellers to outsource their order fulfillment. After all, many of them don’t have the resources to do self-fulfillment and others are growing and need immediate help.
By doing so, it’s going to free up a lot of time for you to focus on other areas of growth in your company. Subsequently, if you’re shipping a lot of orders, order fulfillment costs can be reduced by companies that have extensive networks and shipping partners.
With that in mind, let’s take a look at the core 4 areas of order fulfillment cost.
(1) Inventory Receiving Cost
You’re going to quickly learn that most 3PL companies charge fees for accepting and verifying inventory. Also, inventory receiving fees may charge for pallet, per box or per shipment.
(2) Inventory Storage Cost
A 3PL company will charge you for stock storage space in their warehouse. Inventory storage fees vary depending on the 3PL provider, such as fees per pallet or SKU storage.
(3) Pick And Pack Cost
Furthermore, you may find that some fulfillment companies do charge a fee per pick and pack. The quantity of items picked and packaged determines the cost. Some 3PLs may include pick and pack cost into a single order fulfillment cost.
(4) Shipping Cost
3PL fulfillment companies make it clear that you’ll be responsible for the shipping fee. The good news, if you’re doing in-house fulfillment, these charges are likely to be far less than your self-fulfillment cost. Since fulfillment centers have large volumes, they can offer discounted shipping services when others can’t.
Order Fulfillment Cost Example
Let’s break down these 4 core areas together so we can give you an idea how all of these can contribute to cost. By doing so, you should be able to get an estimate of what you may expect to pay in 3PL cost.
- Stock Receiving – $30 Per Shipment – Monthly Total – 20 – Total Cost $600
- Stock Storage – 22 Cents Per Cubic Foot – Monthly Total – 5,000 cubic feet – Total Cost – $1,100
- Order Pick & Pack – $2 Per Order – Monthly Total – 500 orders – Total Cost – $1,000
- Shipping – Actual Cost Of Shipping – Monthly Total – $5 average per order – Total Cost – $2,500
Total Monthly 3PL Cost – $5,000 a month
This estimate may come as a surprise to some of you, but you have to consider how much it cost to have someone do this for you in-house. When you calculate what it would cost in-house, you may find that outsourcing to a 3PL fulfillment provider may save you a lot more than you first thought.
While cost is certainly an important factor, not having the right fulfillment process in place could be costing you growth opportunities. A lot of companies are fearful of making that jump until they realize that they can save money and be more efficient with a fulfillment partner.
Additional Factors That Can Determine Fulfillment Cost
Besides the 4 main order fulfillment costs listed above, there is a few additional factors that can determine your cost. Let’s go over them now.
(1) Number Of SKUs
The amount of SKUs that you have can add additional order fulfillment costs, especially if you have high SKUs.
(2) Fulfillment Center Distance
If you’re using multiple fulfillment centers for your distribution, the distances between fulfillment centers effect order fulfillment costs.
(3) Product Dimensions And Weight
Just as shipping cost is determined by weight and size, the same is true about your order fulfillment cost. Likewise, if you’re shipping large products or heavy products, it can cost you more.
(4) Special Storage
Warehousing products that need special storage or special handling will likely incur a higher order fulfillment cost.
(5) Unsold Inventory
If you’re housing inventory that wasn’t sold, you may incur fees for doing so.
(6) Special Shipping Materials
If you’ll be storing special shipping materials in a warehouse, such as pallets or crates, you may be required to pay for that separately or as part of order fulfillment cost.
Special Services That May Add Fees
Lastly, there’s a few special services that can be additional order fulfillment costs that you should be aware of.
- Custom Labeling or Packaging
- Specialty Packing or Kitting
- Customer Service Support
- Custom Inserts (Personal Notes, Packed Orders)
- Light Assembly, Minor Product Assembly
- Custom API Integrations For Ecommerce, Online Stores
Additionally, some fulfillment companies offer value added services, just in case your special services is not listed here.
Inbound Inventory Shipping
Usually it’s cheaper to ship pallets via freight versus using parcel shipping companies like FedEX or UPS for inbound inventory to save on order fulfillment costs. As can be seen, most fulfillment centers work with freight shipments daily anyway, so they can guide you on the best decisions to make for your inbound shipments.
If you want to speak with one of our 3PL fulfillment experts, feel free to reach out to us by calling 1-920-967-9201 or you can use our contact page. Of course, we’ll be glad to answer any order fulfillment cost or other questions you have.