The field guides · 02
3PL pricing models explained
Updated
In this guide
Compare the invoice you would pay, not the storage rate at the top of the quote. A provider's proposal needs to explain what is included and when extra charges apply.
Ask each finalist to price the same month of your operation. Then test a quiet month and a difficult one. These are warehouse service charges, separate from a 3PL Connect subscription.
The anatomy of a 3PL quote
Separate space from work. Storage pays for the inventory footprint. Receiving and outbound handling pay for the work around it. Additional services and account charges can change the total.
Give providers the same input file: inventory levels, incoming deliveries, orders, units per order and returns. Ask them to identify any assumptions they made instead of filling gaps silently.
Keep the original quote and your input file together. You'll need both when checking the first invoice.
Storage pricing models
Ask what is being measured and when. A quoted storage rate means little until you know how the provider counts occupied space.
Per pallet per month
Check the allowed pallet dimensions, weight and height. Ask how partially filled positions and unusually sized pallets are billed. Do not assume your current pallet layout fits the quoted unit.
Have the provider explain the count dates using a shipment that arrives and leaves mid-month. Snapshot, anniversary and prorated billing can produce different totals even when the monthly rate looks identical.
Per square foot
Confirm what the quoted area includes and how it is measured. Ask whether the space is dedicated to you, what happens if you exceed it and whether unused area is still billed. Any capacity commitment needs to be explicit in the agreement.
Per bin, shelf, or cubic foot
Ask how products are assigned to bins or shelves and when an additional location becomes billable. For volume-based pricing, confirm how dimensions are measured. A small amount of stock spread across many SKUs may use more pick locations than you expect.
Flat monthly pricing
List everything the flat fee covers. Then list its limits and the charges beyond them. Test the proposal against a quieter month as well as a busy one so you can see the cost of unused allowance and overages.
Handling fees
Ask the provider to trace an example shipment from arrival to dispatch. Match each activity to its billing line. This makes missing charges easier to spot.
Receiving
Describe how goods arrive, including palletization and labeling. Ask what the receiving rate includes, when hourly work starts and who approves extra labor. Include counting, sorting and handling discrepancies in the discussion.
Pick and pack
Clarify whether the rate applies per order, line, unit or case. Price a single-item order and a representative multi-item order. Confirm the cost of boxes and protective materials, including any special packing instructions.
Kitting and value-added work
Supply a written example of a kit, relabeling task or retail-preparation job. Ask for the charging unit and approval process when the work differs from that example.
Treat shipping as a separate calculation. FedEx describes billable package weight as the greater of actual or dimensional weight. Ask which carrier and service rules apply to your shipments, how cartons are chosen and whether quoted carrier rates include a markup.
Setup and onboarding fees
Ask what setup work the proposal covers. Break out system connections, catalog preparation, initial receiving and training. Identify anything priced separately.
Confirm who owns each task and what you must supply. Ask how later changes, such as adding a sales channel, will be charged. If a setup fee is waived, check whether the waiver carries a term or volume commitment.
Monthly minimums and low volume
A minimum can apply to the whole invoice or only to named services. Ask for the exact formula and which charges count toward it. Do not add a minimum on top of eligible charges if the agreement describes it as a floor.
Model a low-volume month with your actual storage needs. Divide the total by the orders you expect to ship to understand the effective cost per order.
Ask whether the proposal includes a ramp period or different seasonal terms. Get any exception in writing rather than assuming it will carry over from a sales conversation.
Accessorial charges and hidden costs
Request the schedule for work outside the base service. Check when approval is required and what records will appear on the invoice.
- Returns: what is included in inspection and how disposition is charged.
- Rework: relabeling or repacking that differs from the agreed process.
- Aged stock: the time threshold and inventory value or quantity used.
- Special projects: estimates, hourly rates and approval limits.
- Rush work: late cutoffs or expedited processing.
- Seasonal adjustments: applicable dates and the services affected.
- Administration: reporting, technology access and other account fees.
How to pressure-test a quote
Choose a difficult month from your own history. Include a late inbound shipment, a return spike or slow-moving stock if those happen in your operation. Ask the provider to show which extra charges would apply. Resolve unexplained lines before signing.
How term length changes the math
Ask for comparable proposals at the term lengths you are considering. A longer commitment may change the price, but it does not by itself guarantee a discount or reserved capacity.
Compare renewal terms and future rate changes alongside the opening price. Identify volume commitments, notice deadlines and the cost of retrieving inventory. Have the agreement reviewed for your circumstances.
Choose a term you can support with your forecast and the evidence you have about the provider. Do not exchange flexibility for a benefit that exists only in the pitch.
Common questions
- How does per-pallet storage pricing work?
- The provider charges against a defined pallet or storage position. Confirm the allowed dimensions and the billing calendar, including partial months and partially occupied positions. Ask for an example using your own inbound and outbound dates.
- What is a monthly minimum in a 3PL contract?
- It sets a minimum charge under the agreement's formula. Ask whether it applies to the full invoice or particular services, which fees count toward it and how it behaves during onboarding or low-volume periods.
- What are accessorial charges in 3PL warehousing?
- They are charges for work or conditions outside the base service. Ask for the schedule, the approval rules and supporting records. An unexpected charge still needs to match the agreement.
- Do 3PL Warehousing Providers charge setup fees?
- Some proposals include setup or onboarding charges. Ask which tasks they cover and whether additional connections or later changes cost extra. Check any conditions attached to a waiver.
- Is a longer 3PL contract cheaper?
- Not necessarily. Compare written proposals with the same operating assumptions. Check future increases, volume commitments and exit costs. Reserved capacity must be stated explicitly rather than inferred from the term.
- How do I compare quotes from different 3PL Warehousing Providers?
- Use the same inventory and order sample for each provider. Include returns and unusual handling. Compare an ordinary month, then test low volume and a difficult month before choosing.
From the glossary