Oftentimes, companies are unfamiliar with how warehousing storage prices work – so one of the most frequent questions we get asked is “how do companies charge for warehousing”? In order to help companies understand the costs associated with storing products or goods in a warehouse we created this article. There are a couple of ways different ways that companies charge for storage that you might encounter depending upon your unique situation. Most frequently, storage fees will fall under one of these three methods: Pallet storage fees, cubic footage fees, or square foot pricing.
One of the most popular ways by far that warehousing companies charge for storage is simply by the pallet. Typical pallet sizes are 48×40 and usually go about 4-6 feet high. This is how bulk product will be stored but if you do have pick and pack and fulfillment, then the warehouse might break some of this out in order to pick it more efficiently – therefore the overall number of pallets used in the warehouse would increase slightly in order to accommodate these “pick bins”. When billing out using this method, a warehousing company would total up the number of pallets at one time during the month – they would most likely literally have a person actually total the number of pallets but could also have it automated to calculate the pallets in the warehouse management system. Pallet storage fees are great for pallet scenarios but it becomes a little trickier for high pick scenarios where more pick bins are required. In these cases companies might be charged for more “air” under per pallet methodologies. Typical pallet storage costs range from $6 per pallet per month to upwards of $15 per pallet per month or more.
Cubic Footage Storage
Another way warehouses charge for storage is by the cubic footage. One advantage to this method is that it allows for the automation of the calculation of total storage space being used. For example, a company would simply enter in the dimensions of each company’s items in their warehouse management system, and using a simple automated algorithm, the warehouse can calculate the total cubic footage under management by simply multiplying the total units by the unit cubic footage and summing all of the SKUs. One good thing about this method is that it doesn’t overcharge you for “dead space”, which happens more with pallet storage. However, this method requires a lot more management in terms of always updating the correct dimensions of each SKU in the system and may have higher associated costs for receiving product into inventory since so much more care and information is required. Typical cubic footage costs range from about $.25 to $.45 per cubic foot.
Square Footage Storage
A third way that warehouses calculate storage fees are using square footage. This is far less common and is highly contingent upon the going rates in the specific market. This is more common for bulkier and non-standardized product that can’t fit into pallet spaces or racking. In this scenario, warehouses would charge the customer a set price per square foot. The warehouse may, contractually, require the customer to pay for a set amount of square footage, or the warehouse may only charge on actual space used – depending upon the individual agreement.
Other Factors That Affect the Warehousing Costs, Warehousing Charges, and Warehousing Prices and Fees
There are many other factors that can play a part in the actual storage charge. First, location is important. In areas where the cost of real estate is higher, the storage fees will be considerable higher. Second, costs can vary if the warehouse owns or leases the facility. In cases that a company has been around for quite some time and owns the building outright, more flexibility might be available to provide lower rates. Third, there are a number of special control requirements that can affect overall pricing. Examples of these factors are refrigerated or climate control storage or even special storage conditions, equipment, or licensing that costs the warehouse more in order to facilitate. In these cases, there will most likely be higher fees to cover the additional costs. Fourth, there may be additional costs to cover bonded warehousing or other insurance requirements. Finally, it’s important to understand that volume may impact overall pricing. In cases where a customer will be occupying a large volume of space, they may be able to command a lower rate.