How 3PL Pricing Works: A Complete Guide

Each week we have conversations with prospects at Buske Logistics about 3PL pricing and how each fee is determined. It can be confusing process. Pricing for our Fortune 500 clients such as AB InBev are much more complex compared smaller companies such as Paddle Smash, one of our e-commerce clients.

In this guide, we will detail the most common 3PL pricing fees and what to expect based on our experience of being in business over 100 years.

Looking for a simple template and pricing expectations? Download our 3PL pricing template.

How does 3PL Pricing Work?

There are two main components of 3PL pricing - the warehousing fees and transportation fees. 3PL warehousing pricing covers storage and handling or packing product from storage to the mode of transportation. 3PL transportation pricing covers the cost to move product from one warehouse or facility to another location.

Breaking down the components that impact 3PL warehouse cost and 3PL shipping rates can provide a clear understanding of what businesses are paying for and why. Below are the components that commonly constitute any 3PL pricing model:

3PL Warehouse Pricing - How it Works

There are typically 3 main buckets of costs for 3PL warehouse pricing: storage, handling or picking, accessorials, and any account management fees to cover the overhead.

Storage

1. ‍Initial Pallet Charge: These are the initial charges associated with bringing product into a warehouse. It is also called the 'Pallet In Fee.'
2. Recurring Pallet Charge: This is the fee for renting space in a warehouse. It is calculated based on the cost of renting or owning warehouse space and an added mark up.
3. Fee per Square Foot: This is a charge if a customer would like to guarantee space for a period of team. A fixed fee will typically be structured as a price per square and the quantity the customer wants to cover.

Handling

1. Pallet In and Pallet Out: This is the fee to move product from a truck to storage. It's also called the 'Pallet handling' charge.
2. Casing picking: Case picking is the price to have a warehouse worker move a case from a pallet and ship it. That could entail putting it on another pallet or shipping it as is with a parcel carrier.
3. E-Commerce order: An e-commerce fee, also known as a fulfillment fee or order fee, covers the cost for a warehouse worker to open bulk product, sort through it, and pack into a new package.
4. Kitting: The fee associated with putting multiple items together to create 1 unique product or SKU. An example is putting together 3 flavors of hot sauce into a special package to create a variety pack.

Accessorial

1. Hourly Labor: Charge on a per hour basis for any ad hoc work, such as inspecting product. This is also called value added logistics.
2. Pallet Supply: The fee paid for a new pallet. This is mostly seen if product is received in a container from overseas or the pallet comes damaged.
3. Air bags: Air bags are added to the side walls between a truck and product in order to secure it from damage during transit.
4. Blankets: Blanket fees are special blankets added to loads shipping into cold climates where there's a concern that the product might freeze.
5. Stretch Wrapping: If the manufacturer doesn't properly wrap a pallet enough, you can have a warehouse apply stretch wrap for a fee.
6. Labeling: This is a fee for anytime a warehouse picker has to apply a sticker or label.
7. Account Management: This is typically a flat charge to cover overhead in a warehouse operation such as insurance, finance, payroll, maintenance, and office staff.

3PL Transportation Pricing - How it Works

Transportation pricing is commonly structured by mode of transportation. In this guide we will focus on the 3 most common modes, which are full truckload (TL), less-than-truckload (LTL), and parcel.

Truckload

1. Rate per mile ($ / mi): This is simply the rate per mile to transport a full truckload from one address to another address. If a trip is 1,000 miles and the rate is $2.00 per mile, the cost would be $2,000 to ship it.

Less Than Truckload

1. Base Rate using the FAK (Freight of All Kinds) Class: This is a negotiated agreement where multiple freight classes are treated as one or a few specific classes, simplifying pricing for shippers who send mixed goods.
2. Base Rate using Hundred Weight: Pricing based on a rate per hundred pounds.
3. Base Rate using DIM Weight: Also known as dimensional pricing, dimensional pricing, or dim weight, is a method where the price is determined based on the cubic volume (size) of the freight in addition to its actual weight.

Parcel

1. Rate by weight and zone: Similar to full truckload, parcel carriers determine a fee to transport a parcel by the weight of the package and the distance of how far it's going. To simplify pricing across the board, they use zones that aggregate zip codes in mileage parameters. For instance, Zone 2 for UPS is 51 to 150 miles. Any shipment with the same weight and dimensions to another zip code that falls between those two parameters will receive the same price.

Accessorials:

There are a variety of surcharges that are added to all transportation modes depending on a variety of factors.

1. Fuel surcharge: Fluctuations in fuel prices are a major factor in the all in price to move goods. This is the most common surcharge and very normal to see on your bill. It's the fuel to take the product from A to B.
2. Remote surcharge: This is a fee commonly added to LTL and parcel deliveries where there's an added amount of time to deliver a package. ‍
3. Holiday surcharges: During holiday periods, carriers will charge fee for the high volumes they experience.
4. Lumper fees: Commonly see in full truckload where a driver has to manually restack product.
5. Residential fee: This is a fee commonly associated with parcel and LTL to deliver to homes. For LTL, it may also be called a lift gate charge.

An Example of 3PL Warehousing Pricing for a Small Company

A heavy e-commerce brand shipping 1,000 orders per month and storing 50 pallets at a time might have the following pricing.

1. Storage:
   • Initial: $15 per pallet
   • Recurring: $15 per pallet
2. Handling:
   • Pallet in: $10 per pallet
   • Pallet out: $10 per pallet
   • Case pick: $1 per case
   • E-Commerce order: $2.25 per order
   • E-Commerce item: $0.50 per item
3. Transportation:
   • Shipping: Cost + 10%

An Example of 3PL Warehousing Pricing for a Big Company

A large company will typically have a much more complex pricing schedule. Fees vary greatly depending on the location and cost of local labor. Below is an example of pricing we built out for a company looking to store 1,500 pallets near Atlanta, Georgia. Typically, larger companies will be big enough to manage transportation on their own. We did not quote our transportation.

1. Storage:
   • Initial: $7.17per pallet
   • Recurring: $7.17 per pallet
2. Handling:
   • Pallet in: $3.82 per pallet
   • Pallet out: $3.82 per pallet
   • Case pick: $0.60 per case

For most deals, we will use a standard accessorial table. Those prices typically do not fluctuate as they are immaterial in greater monthly cost. Handling and storage are the main drivers of cost for large warehousing needs.

Is It Cheaper to Use a 3PL?

Whether using a third-party logistics (3PL) provider is cheaper than managing logistics in-house depends on several factors. Here are some things to consider: 

1. Economies of Scale: 3PLs often have the bulk purchasing power to negotiate better rates for shipping, packaging materials, and warehousing. They also have shared resources (e.g., warehouse, technology, and labor) that reduce client costs.

2. Reduced Overhead Costs: Using a 3PL eliminates the need for significant upfront investments and added labor to manage day-to-day logistics operations—these effectively lower facilities, labor, equipment, and administrative expenses.

3. Flexibility and Scalability: Outsourcing logistics can make scaling operations on demand fluctuations easier without incurring permanent costs. 3PLs also provide customized solutions to meet specific needs, potentially reducing unnecessary costs.

4. Expertise and Efficiency: Trusted 3PLs are highly experienced in optimizing processes and solving logistics challenges. They also use advanced technology and software to improve operational efficiency while companies focus on their core business goals.

Each business has unique logistical needs, but there’s a good reason that most Fortune 500 companies use a 3PL. Even more so, the benefits of outsourcing logistics to trustworthy 3PLs can be particularly beneficial for small to medium-sized businesses.

Frequently Asked Questions

What is 3PL pricing based on?

3PL pricing is based on the volume and storage quantities. The warehouse becomes more efficient and can spread out their overhead costs over a great amount of product. Handling charges are based on the volumes of the shipper. If a brand is shipping large volumes, the warehouse can be more efficient with available staff. For smaller brands, the warehouse still has to pay the forklift driver regardless if there's work to be done.

Do 3PLs offer customized logistics solutions?

Yes. 3PLs can design a custom solution depending on their capabilities. It all comes down to their capabilities and clearing identifying the scope of work.

What hidden fees should you watch out for in 3PL pricing?

The biggest area where 3PLs hide additional costs are in transportation and any line item that is cost + 10%. One hidden cost is simply the location of the 3PL. A 3PL may market they provide $1.00 fulfillment fees and incur a loss on that line item, but they could be located in an non-optimal location such as Montana where transportation is expensive and they recoup any losses to cover fulfillment. Cost + 10% from St. Louis, Missouri, to a majority of U.S. addresses is a lot cheaper than cost + 10% from Montana.

The other area for hidden fees in pricing is a 3PL may be advertise cost + 10% but their transportation rates are lower. This is why we at Buske Logistics have the motto of 'Simple, transparent, pricing.' We show a full pricing build up and provide any rate cards that are given to us from carriers.

The Cost of Achieving Logistics Excellence

Knowing the detailed breakdown of 3PL warehouse pricing allows companies to make informed decisions, optimize logistics operations, and better manage their budgets. By partnering with Buske Logistics, you can leverage our expertise and customized solutions to streamline your supply chain and drive your business forward. Contact Buske today to discover how our customized logistics solutions can help streamline your supply chain.