Merchants want to know exactly how they will be billed for storing their inventory in our fulfillment center. There is often confusion around this topic as the way inventory storage charges work varies from company to company.
The most common methods used to assess inventory storage are to charge per cubic foot, per pallet, per SKU, or a combination of all three. So let's review these different methods and discuss their differences.
Per Cubic Foot
Some distribution companies base their storage costs on the number of cubic feet their items, or SKUs, occupy. To calculate cubic feet, you multiply the length, width, and height of an item.
Let's say you sell books. One of your books measures 6 x 9 x 1 inch. In this case, the book measures 54 cubic inches. There are 1728 cubic inches in a cubic foot, which means that if house loads per cubic foot for storage, you divide 54 by 1728 to determine the cubic feet of your book, then multiply by the rate billed per cubic foot.
Here is an example. Suppose a distribution house charges $ 0.30 per cubic foot for storage per month. For a book, your costs would be 54/1728 x $ 0.30 = $ 0.009 per month. To store 1000 copies of this book, your costs would be 54/1728 x $ 0.30 x 1000 = $ 9.38 per month.
An important consideration with this model is whether and how the accomplishment house rounds up its measurements. For example, many companies round up to the next inch when calculating the LxWxH dimensions of an item. This can make a significant difference to your storage bill.
Per Pallet
It is also common to charge by the pallet for storage, rather than by each individual SKU. For example, a treatment home may have a monthly fee of $ 17 per pallet. The average size of a pallet is 48 "x 48" x 48 ", which corresponds to 110,592 cubic inches, or 64 cubic feet. So, to store a book, your costs would be 54/110592 x $ 17 = $ 0.008 per month To store 1000 copies, your costs would be 54/110592 x $ 17 x 1000 = $ 8.30 per month.
You can see that in this scenario, it's a little cheaper with the palette, but it is not always the case. There are some important considerations:
1. Pallet size
The average size of a pallet is 64 cubic feet; however, some processing warehouses will use industrial-sized pallets, which measure 42 ”x 48” x 48 ”, or 56 cubic feet.
2. Items per pallet
Not all items fit perfectly on a pallet. So even if, once calculated, it looks like your 2,000 items will fit on one pallet, this may not be the case, and you might even end up paying for two pallets.
3. Restrictions
Some order fulfillment companies have low storage rates per pallet, but only allow one item or single SKU per pallet. So if you have 10 references, even if your total inventory can fit on 5 pallets, in this case, you will actually pay for 10 storage pallets.
Per SKU
A third commonly used method is to bill for storage by the SKU. For example, you may have a monthly fee of $ 2.00 for each individual SKU you have in stock. This method can be used in combination with storage costs per pallet. For example, a monthly fee of $ 2.00 for each SKU, in addition to the storage fee per pallet of $ 17.
It is important to take into account the calculation of storage costs. we charge for storage based on the number of items at the weekend. This method rewards our customers for the items we receive and ship within the same week, which essentially results in free storage for those items. This is not the case with all order fulfillment companies, so make sure you understand both how and when storage is calculated and billed, as well as how you can verify that the charges are correct.
Finally, when looking for distribution houses, it may appear in some cases that you have very little or no storage costs. It is not uncommon for some companies to include storage costs in their "processing" or "order processing" costs, so be sure to look at the total processing cost per item.