One of the main benefits of an e-commerce business is that there is no need to rent expensive retail space. However, that doesn’t mean there is no cost to serving your customers. There is still a need to store, sort, pack and ship customer orders and as your e-commerce business grows, or you expand into foreign markets, you will likely need to outsource this order fulfilment process. This in turn raises additional questions around what is included in third party logistics (3PL) pricing and how do you identify the impact on your e-commerce business. How will you calculate price per order and what will this include?
3PL costs vary depending on the pricing structure of the provider and the amount of the service you need. Most 3PL providers have relatively complex pricing schemes, which can result in “hidden” costs. Understanding costs, how they accrue, and what each cost means will help you to understand how much your order fulfilment process is actually costing you, what you should budget for it, and how you should charge customers for it.
Understanding order fulfilment costs also makes it easier to find and compare 3PL fulfilment solutions so you can choose the best provider for your product types, location, and budget.
How does 3PL pricing work?
Most e-commerce order fulfilment providers charge the same types of fees, which will change depending on their warehouse size and location, your order volume, the size and weight of your products, and other details. There are no standardised prices for order fulfilment, so you will have to shop around to find the best solution for your business.
Some key things to be aware of when looking at 3PL pricing include how storage is calculated, the process for warehouse pick and pack and shipping costs. In some cases, your largest costs will revolve around storage and warehousing. For example, if you’re paying based on product weight you will pay a great deal for large and heavy items. In other cases, your inward goods costs could be higher, especially if your product needs sorting on arrival.
Despite the fact that 3PL providers often have different fee structures, there are a few common costs that individually will influence the costs of using 3PL for your e-commerce business.
What are common 3PL order fulfilment costs?
Onboarding costs
Onboarding fees are typically a one-time charge, which include integrating your business with the fulfilment solutions operations, for example, connecting your online shopping cart to their fulfilment centre, setting up accounts and access, updating systems with SKUs, or integration and order testing. It may also include offering training so you know how to use their resources. This is free for some 3PLs, but can cost for others.
Inbound shipping and receiving
Before any orders can be fulfilled, you first need to get your inventory into the warehouse. You’ll need to find a way to transfer stock from your current location to your new 3PL. Taking acceptance of goods, more commonly known as inward costs, is something 3PL companies will charge for. The charges will vary for this, such as per hour, by unit, carton, or pallet, and depending on the fulfilment provider.
Storage and warehousing
Most 3PLs charge based on the volume of space your pallet or product is using in their warehouse. Expect to be charged by the pallet or square metre. You can also be charged on a weekly or monthly basis. If you are likely to have large fluctuations in stock levels, how this is charged could have a significant impact on your overall order fulfilment costs.
Pick and Pack
Pick and pack refers to what happens after an order is placed. This can be charged on an hourly or on a per item or per order basis and costs can vary depending on how the warehouse manages pick and pack and if there are any special requirements such as capturing product information (e.g. serial number) before shipping the product. The process that is best for your e-commerce business will depend on your size, your product and the structure of your orders.Boxes, packaging, label printing and order inserts
Boxes and packaging fees are the actual cost of packaging and the boxes you’ll be using. This may be rolled into the fulfilment fee, or may be itemised. Any order inserts and label printing can cost more each, and are usually only included on request.
Shipping
This is the base cost of shipping your orders through different carriers. It will vary based on how quickly you want your order delivered, and whether your items should go out by air, sea, or land. Shipping rates through a 3PL can be significantly lower than if you are paying directly. Many 3PLs partner with shipping carriers and since they send orders in such high volumes, they have the ability to negotiate lower shipping rates. This can mean reduced shipping costs for you and your customers.
Additional costs
Most 3PL companies will have an additional charge for things like managing customer returns and general account management. These costs can easily mount up, so it is worth asking your 3PL provider for a detailed list of additional costs. Watch out for things like what happens if packages are mislabelled, if you want to check stock quality or do a stock take.
Pay per order 3PL and lower the cost of selling in NZ
At Stocka we believe in keeping our costs simple and transparent. We provide free onboarding. There are no minimum order fees and no minimum storage fees, meaning we are able to store and despatch orders of all sizes of business.
Want to know the costs upfront?
Check our 3PL Cost Calculator or fill out the form below to book a 15 minute 3PL chat.
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