When partnering with a public warehouse, users expect to pay storage charges for warehousing their products within the multi-client storage and distribution facility. Storage rates are fees charged per unit for storage of products. These rates typically vary based on the number of days in inventory, the amount of times the inventory turns, the stackability of pallets, and the storage media used.
Public warehouse providers densely store their customers’ products to optimize all available space within the warehouse footprint while providing adequate aisle and dock space to move pallets of products safely and efficiently throughout the facility. To achieve greater storage density, some warehouses are racked versus just bulk storage of product on the floor.
In short, there are many factors the 3PL warehouse provider considers when deciding how to best store products safely, affordably, and profitably. While taking the above factors into consideration, public warehouse providers typically come up with their storage rates based on three different methods for invoicing their customers. These common methods of invoicing for storage of products include:
- Inbound and Monthly Recurring Storage: Pallets invoiced upon inbound receipt at the warehouse and billed again on the 1st day of the month for each month the product remains at the warehouse.
- Anniversary Billing: Billed when the goods are received into the warehouse facility and on each monthly anniversary date that the goods are in storage.
- Split Month Billing: Products received between the 1st and the 15th of the month are charged for a full month of storage. Goods received after the 15th to the last day of the month are charged a prorated amount. Pallets are then invoiced on the 1st day of the month thereafter for each month the product remains at the warehouse.
At first glance, it would seem Split Month Billing is the way to go, but are the savings really there? One might assume they’re going to pay a half rate after the 15th of the month, but for most public warehouses that is not exactly how split month billing works. That’s because 3PL warehouses need to earn enough revenue per unit to cover the fixed costs of space. Those costs include all things associated with the building like rent, taxes, utilities, and more. Therefore, when rates are set per unit, such as a pallet, the pallet rate must cover these costs.
For the 3PL warehouse, the simple concept of cutting the rate in half as of the 16th of the month can put the warehouse in jeopardy of not earning enough revenue in the month to cover all the storage costs. As a result, it’s necessary to increase the storage rates on both the front half of the month 1st-15th and also on the back half of the month the 16th-EOM, to cover the difference.
For users of public warehouses, most do not have a level of control over their supply chain to consistently schedule inbound shipments over the last two weeks of the month. Therefore, under a split month commercial program, the warehouse customer runs the risk of paying more for storage on the front end of the month because the rates were increased to cover the differential created by a split month billing program.
In most cases, it is less risky for both the customer user and the 3PL warehouse to use a commercial program other than split month billing. Most 3PL warehouses and customers alike prefer to pay storage as an Inbound and Monthly Recurring Storage because it gives the customer more flexibility on their shipments and provides cost-savings over time.
For more information on 3PL warehouse storage pricing and services offered by The Shippers Group, contact us today.
The Shippers Group is a leading national third-party logistics company headquartered in Dallas, Texas providing supply chain support to brand leaders and market innovators in industries including food and consumer packaged goods. With food-grade multi-client and dedicated distribution facilities in the United States, The Shippers Group provides supply-chain solutions with outsourced warehousing, transportation, contract packaging, and e-commerce fulfillment services. Since 1901, The Shippers Group has relied on core values of integrity, innovation, excellence, and safety to grow customer relationships, focus on continuous improvement, and engage sustainable business practices that deliver results. More information is available at www.theshippersgroup.com.