How Much Does Third-Party Logistics Cost?
All right, you have been researching third-party logistics, and you have read more than a few articles and resources online. As a result, you have concluded that you want to partner with a contract packaging company and initiate a 3PL program for your business.
The only problem is, you are not sure how much a 3PL program will cost you. And, despite hours of looking for this information online, you can't seem to find pricing anywhere.
By now, you are probably annoyed by how difficult it has been to find pricing. Honestly, that is fair! However, the truth is that you are having trouble finding this information because it is entirely dependent on a couple of different elements that are unique to your business.
Today, however, we are going to show you how to calculate your cost for 3PL!
With over 25 years in 3PL and other contract packaging services, Industrial Packaging understands all that goes into quoting a hard number for a third-party logistics agreement.
This article will discuss what goes into putting a 3PL quote together and help you figure out how much third-party logistics will cost your company.
How Much Does Third-Party Logistics Cost?
Wouldn't it be nice to be able to get a hard dollar amount to answer this question? Of course, it would! But, unfortunately, pricing for 3PL doesn't really work that way. So, with that being said, we will help you understand the factors that'll drive up or down your cost for outsourcing 3PL.
When it comes to providing the total cost for outsourcing your supply chain with a third-party logistics provider, pricing is highly case-sensitive.
The cost for 3PL for one company is going to be vastly different from your price. This is because the total cost of third-party logistics for your business will depend upon several factors specific to your company.
What Are The Components Of 3PL Pricing?
There are two factors to consider when it comes to pricing third-party logistics for your company. These two items are "in and out" fees and storage fees.
What Is An "In And Out" Fee?
The term "in and out" fee is about the cost of loading a pallet with products or unpacking the products from the pallet. Both actions have a fee associated with them.
This fee includes the shipping and receiving of products to your 3PL provider's warehouse. Costs will vary occasionally, but usually, you will have to pay an hourly rate per the number of laborers required to pack and unpack your products.
Generally speaking, you can expect to pay $25-$50 per hour for this service.
What Is A Storage Fee?
Simply put, a storage fee is a cost charged to the client by the third-party logistics provider to store the client's products.
The majority of 3PL providers charge for storage based on the amount of space your pallets require. Generally speaking, you will be charged a flat rate per pallet, but some 3PL providers may charge per square foot.
How Can You Calculate Your Cost For 3PL?
When calculating the cost for your specific 3PL requirements, there is a simple equation to calculate pricing. All you need to do is add the cost of your storage fee to the cost of your in-and-out fee.
To illustrate this equation, we will use hypothetical totals for each metric:
Storage Fee of $14.58 per pallet x 150 pallets = $2,187
In-and-out fee of $50 per hour x 100 employees = $5,000
Equation to calculate your 3PL cost: (Storage Fee) $2,187 + (In-And-Out Fee) $5,000 = $7,187
Are There Any Other Costs Associated With 3PL?
It should be noted; some contract packaging companies will include other fees for other dynamics, which may or may not include: (each item below is linked to information that will allow you to calculate your fees if you choose a vendor other than Industrial Packaging).
- Set-Up - These fees are generally billed as a one-time fee. For the most part, set-up means the integration of software, infrastructure development, and training.
- Box and Packaging - B&P charges are the real cost of the packaging materials and the containers you will be utilizing. Your cost per packaging will be based on the size and custom metrics of your package.
- Pick-n-Pack - PnP is usually charged via an hourly or per-item fee. For many clients, co-packers will roll these costs into fulfillment or B&P fees. However, some co-packers may charge a stand-alone fee.
- Labeling - This is the application of required or client-requested labels on the package.
- Work-Orders - Work-order fees are charged on an hourly basis. The cost is based on the time it takes a laborer to complete a task.
- Returns - Some (but not all) 3PLs will accept returns. The fee for this service usually includes return shipping and processing fees.
- Account Management - These are often hidden fees added to supplement the soft costs associated with managing your account.
While these are additional fees that you can expect to find with many other contract packaging companies, we only charge the in-and-out and storage fee to our 3PL customers here at Industrial Packaging.
Finding The Right 3PL Partner
With the tools above, you have been able to calculate your cost for a third-party logistics plan. With this information, you now have everything you need to buy a 3PL program. But, how do you choose the right contract packaging partner for your 3PL needs?
If you would like an answer to that question, you will want to read How To Choose A Contract Packaging Company: Top 5 Considerations. This article will give you everything you need to pick the right contract packaging partner for your 3PL requirements.
About Nathan Dube
As the Digital Marketing Specialist at Industrial Packaging, I am honored to create content for such a phenomenal company and work with one of the greatest teams in the Packaging Industry. Whether creating a video, writing blog posts or generating other pieces of content and multimedia, I am always excited to help educate and inspire our prospects and clients to reach their highest potential in regards to their packaging processes and needs.