Third-party logistics organizations charge various fees to companies, like eCommerce enterprises, depending on the services given to fulfill their orders. The overall expenditure your organization would pay a 3PL is divided into four kinds of service charges: inventory receipt, warehouse and storage, picking and packing, and outbound shipping expenses.
The cost of these services is determined by a number of variables, including your number of orders and any particular services your eCommerce business may require, such as processing and shipment of big products or inventory that must be refrigerated or stored in a climate-controlled environment.
The best part is that partnering with a 3PL may significantly lower your eCommerce company’s expenditures in a variety of crucial areas, allowing you to concentrate on building your business, extending your product range, and expanding your market. However, collaborating with a 3PL has a cost.
This article discusses the various fulfillment parts of the budget and how to simply calculate 3PL costs.
- 1 3PL Cost Definition
- 2 What Is The Meaning Of Cost Per Order?
- 3 Standard Service Fees For A 3PL
- 4 Ways And Formulas To Calculate The Fulfillment Cost Per Order
- 5 Example Of 3PL Cost
- 6 An illustration of a standard 3PL price structure and its related charges are shown below.
- 7 Conclusion
3PL Cost Definition
3PL costs or also known as order fulfillment costs are the costs you would incur if you paid your logistics partner for their services such as:
- Getting your inventory
- Keeping your goods in their storage
- Order processing using multiple shopping cart systems
- Selection, packing, and shipping
- Taking care of your returns
These standard order fulfillment costs may vary depending on numerous factors, containing your 3PL provider’s pricing strategy, your order frequency, and any additional or unique services your company may want. To decide which logistics provider is appropriate for your e-commerce company, you need to become acquainted with the different pricing structures and fulfillment costs that may apply.
What Is The Meaning Of Cost Per Order?
Pick-and-pack costs often start at 20 cents per item. However, there are additional aspects your e-commerce firm should consider when determining your ultimate price per order and whether hiring a 3PL is the reason for your company. When calculating your company’s fulfillment costs per order, order fulfillment charges and fees must be considered.
3PL Pricing Models
While most 3PLs employ variable pricing structures, others provide additional possibilities. When selecting a logistics partner, the price model will play a considerable role in your selection.
Flat Rate Pricing
Flat-rate plans, as opposed to flexible plans with a choice of 3PL prices, charge per order, shipment, or monthly. Storing, fulfilling, kitting, shipping, customer support, and customer returns are all included in this charge.
Pricing By Kit
Based on the intricacy of the assembly, your logistics firm may charge a different cost for your inventory that is held in different components but must be integrated when ordered by the clients.
Pricing per Bin, Shelf, or Pallet
The most cost-effective alternative is to store your goods by pallet, which costs from $5 to $15 for each pallet every month. If you choose to pay for storage by the cubic foot, of course in case of your logistics partner provides that service, this alternative typically costs between 30 cents to 55 cents for each cubic foot monthly.
Small products may need to be stored in separate containers to make them easier to access for quick fulfillment. When it is required for your e-commerce firm, the cost typically ranges between $1 and $2.50 per month for each storage container required.
Pricing On A Project Basis
3PLs frequently engages with businesses that are running crowdfunding campaigns and need to contract for service on a project-by-project basis instead of on a continuing process.
Buyers are charged a discount rate and transaction fee in addition to wholesale charges by 3PL suppliers.
Standard Service Fees For A 3PL
Most logistics providers offer similar costs for services like warehousing and pickup, which differ based on:
- Your chosen 3PL
- The scale and position of their warehouse
- The order frequency of your e-commerce business
- Your items’ dimensions and weight
- Any component or kitting that you need
- Other factors to consider
Storage and warehousing will be your most expensive expenses overall. Despite the existence of general cost ranges for the various services provided by 3PLs, there are no standardized rates for fulfillment due to the numerous factors that must be considered. This implies it is critical to identify the 3PL provider and price plan that best meets the demands of your e-commerce firm.
While no e-commerce businesses are similar, we understand you may be curious about how much logistics providers normally charge. Here are some ballpark figures to consult.
Once you start working with a logistics company, they will most definitely charge you a one-time onboarding cost, which averages approximately $550 for small e-commerce enterprises. The normal price range varies from roughly $100 for the simplest e-commerce shop to several thousands of dollars for bigger, more complicated organizations.
The onboarding fee covers the integration of your online shop or stores with the 3PL’s warehouse management system, the creation of your company’s storage infrastructure, and the training of your personnel to process your orders.
Each e-commerce company, even yours, is distinct. Most logistics providers will charge an initial setup cost since every organization has distinct demands and operations. Setup costs are one-time payments made when your account is first formed, and they typically range from $100 to $1000, based on the scale of your e-commerce firm and the intricacy of your organization.
Inbound Shipping And Receiving
Your logistics firm’s fulfillment facility controls your merchandise from the moment it arrives. Inbound shipping and receiving costs often encompass all services linked to inventory management, such as unloading your inventory, tallying and classifying inventory, adding your stuff to the WMS, and placing the things in the warehouse so that they may be picked and packed. These costs are often paid by the hour, varying from $20 to $50 for each hour, or by the unit, varying from $5 to $15 for each pallet, or 25 cents per item.
Warehousing And Storing
Your third-party logistics provider will charge you for the storage space required to keep your merchandise secure until it is sent to your client. The quantity of space your goods needs in the warehouse is often used to calculate your inventory storage costs. In fact, the pricing plans of logistics providers vary based on your inventory requirements and their pricing methodology.
Box And Packaging
Although the box and other packing expenses are sometimes part of the order fulfillment charge, larger or customized printed packing may cost an additional 25 cents to $2 per shipping.
Pick And Package
The process of choosing specific items within the warehouse and packaging them is covered by pick and pack costs. This cost which is also known as order fulfillment charges is frequently used to pay both the picking and packaging along with the normal shipping materials required.
Some logistics services segregate these charges and charge for packaging supplies, along with pick and pack. These are normally charged with a flat price or a standard charge plus an item cost. To provide you with an understanding of these costs, the typical packaging for B2C retailers would be less than $3 and roughly $3.75 for B2B clients.
Order Insertion And Label Printing
Label printing and order inserts are extra charges that might cost 10 cents or more for each shipment.
Generally, your e-commerce firm will be able to utilize either your own chosen shipping carrier accounts or the carrier account of your 3PL to pay for the cost of sending orders to your clients. Both options have advantages.
Utilizing your personal shipping account can provide your organization with more visibility and control, whereas utilizing your logistics provider’s shipping account can provide lower shipping (around 10% to 30%) owing to the 3PL’s greater shipping volumes. Shipping rates are computed based on the dimensions and weight of your purchases.
Work orders are hourly costs depending on how much time an employee takes to complete a task. Work orders encompass operations not covered by current costs, like mislabeled commodities or requesting warehouse staff to verify something.
Return fees, also known as reverse logistics costs, are costs connected with receiving client returns. Return prices may include return shipping rates as well as a processing fee ranging from $1 to $3.50 for checking, restocking, or disposal as needed.
A 3PL will additionally add a fixed fee to your monthly subscription to pay account management duties for your e-commerce company account. This comprises services including customer support contacts, supply chain management, and other operations other than order fulfillment. If you pick a flat cost for your account services, you should anticipate spending from $75 to $250 monthly, or from $40 to $60 for each hour.
Ways And Formulas To Calculate The Fulfillment Cost Per Order
Fulfillment prices vary based on the 3PL and fulfillment warehouse you work with, as well as their pricing scheme, but regular pick-and-pack rates start at about $0.20 per pick. There are also various other expenditures to think about when looking at the complete fulfillment process, in addition to pick and pack fees.
To determine overall fulfillment costs, combine the following charges together:
- Warehouse receiving: Labor expenses associated with receiving fresh merchandise at a warehouse, computed on an hourly basis.
- Inventory storage and management: A monthly fee that includes the number of pallets, shelves, and bins needed to store products.
- Picking and packing in the warehouse: Labor expenses involved with picking and packaging things, measured by the number of items picked over time.
- Normal or custom packaging: The cost of normal packaging (e.g., generic poly mailers and boxes) vs the usage of branded packaging (e.g., eco-friendly packaging).
- Kitting (if applicable): The pre-assembly of distinct elements into a single product or the organization of a package in a certain fashion, which is a service provided by the majority of 3PLs.
- Return processing and management: Return handling and processing expenses include the costs of replenishing or disposing of returned products.
Due to the numerous factors that influence fulfillment costs, it’s always better to employ fulfillment software that can measure the average fulfillment cost of every order.
Below are some simple calculations to compute price when estimating the cost for your individual 3PL requirements. This simple guide can help you gain a better picture of your expenditures if you want to assess your approximate fulfillment cost per order.
First, we have the total warehouse storage fee:
Second, we have the total pick and pack fee:
Third, we have the total receiving fee:
Then, we plus all three above fees together:
Finally, we will have the total fee per order by dividing the total monthly fee by the number of orders per month.
Example Of 3PL Cost
|$25 for the first 2 hours
|Per bin, pallet, shelf
|Pick and pack fees
|Included in total fulfillment cost
|Free for the first pick, then 20 cent/pick
|Included in total fulfillment cost
|Carrier pricing is passed on straight to the client
|Depending on the destination, weight, size, shipment speed, and so forth.
Example of a standard 3PL cost structure
Regardless of whether you’re wanting to build or grow your e-commerce business, 3PLs may provide efficient solutions and prospects for both greater customer service and cheaper 3PL costs. Since stock, scale, complication, and order volume fluctuate so greatly between organizations, estimating how much partnering with a 3PL would charge without the need for a call or meeting to compare your e-commerce business’s demands versus the offers of your possible 3PL partners is difficult. However, it is worthwhile to consider how a 3PL can assist your firm as it grows.