Understanding What You're Paying for When Utilizing Warehousing

Understanding What You're Paying for When Utilizing Warehousing

It's extremely important for any business owner to understand what costs are covered under a warehousing agreement and how these costs are calculated. It's also important that you consider the following factors when trying to determine what pricing is fair for warehousing. You may have overlooked some of the components involved in your bill!

Square Footage Needs or Inventory Size

Warehousing lease costs are calculated based on one of two models. Either you will be charged based on square footage or on inventory size. The warehouse will set the fee based on either how much square footage you need to lease or the amount of inventory you need to house. In most cases, lease options are either month-to-month, annual, or semi-annual. In some cases, you may be able to lease the warehouse space for shorter terms. How long you lease the space can also affect the cost of the lease.

Operation Costs

Let's say that your warehouse rental agreement is an agreement for square footage. You will be charged a base lease fee for the square footage, as well as an operational fee per square foot. For example, the base fee is $60 per square foot, and the operational cost is $40 per square foot; adding the two numbers together and multiplying it by the square footage you need will give you the lease cost. Operation costs are a normal part of warehousing fees. Operation costs include taxes, heating and cooling costs, and maintenance costs broken up between the square footage.

Added Value Services

Your warehousing costs often include added-value services like inventory tracking, logistics, and more. Most warehouses offer a suite of services you can choose from that will help manage your inventory. Depending on which services you choose, it will determine the final costs. According to Abdaislam, the average cost of goods sold in a warehouse comes to about 20% of the total revenue. Warehouse services are essential services for any business since these services help to keep overall costs down.

If you want to understand what you're paying for when you enlist warehouse services, the best way to learn more is to connect with a trusted provider. The right provider will explain in detail how warehouse costs are calculated. Call us today to get started with our services!