3PL Market Roundup – The methodology behind the numbers

Understanding the data, calculations, and purpose of our report.

Many of you are familiar with our monthly 3PL Market Roundup report, which looks at, and reports on, recent pallet storage rates around Australia from 3PL providers within uTenant’s PalletMatch network. This report is designed to offer transparency and insights into the dynamic landscape of third-party logistics (3PL) and warehousing.

This month’s edition of our 3PL Market Roundup shed's some light on how we gather, analyse, and present the data in our monthly reports, and some changes we are introducing for future reports.

Data collection

The cornerstone of our report lies in the real-world data collected from quotes for pallet storage that uTenant receives during the reporting period (for PalletMatch storage requests). These quotes come from a diverse range of 3PL providers operating across Australia. By aggregating this firsthand information, we aim to provide an accurate, and representative, snapshot of the current market conditions.

To maintain accuracy, we include quotes (for standard pallet storage) from a wide array of 3PL providers, both large and small, spanning different regions. We will be refining our data collection process further by using a larger sample size of the rolling three months to the end of the Quarter, to further enhance our reporting. This diversity of 3PL providers and greater range of data will minimise the impact of outliers and offers a more balanced reflection of the market.

Whilst we strive for accuracy, it's important to note that the prices reported are indicative and can vary greatly based on factors such as location, warehouse size, services provided, duration of storage, and the specific businesses we're dealing with. For example, a pallet storage rate for a premium warehouse location close to the CBD for short-term storage will be priced at a higher than median market rate; compared to a warehouse location in a dense logistics hub (therefore high competition area) for long-term storage. We’ll go into how 3PL providers calculate their storage rates and the challenges they face, later in this report.

National median storage rates map with no data

Calculation of reported storage prices

We understand the challenges and importance of getting storage rates right. Our reported storage prices across Australia will be collected and analysed to calculate the median per pallet per week (pppw) storage cost for each region; along with some sensitivity, range guidance, and supporting commentary to indicate any special conditions or volatility impacting a particular geography.

We will continue to use our market data which is taken from regular engagement with our 3PL network and partners on actual storage requirements, or project research, with emphasis given to the three months leading into the end of the Quarter. This method provides a straightforward yet effective way to gauge the prevailing market rate for standard ambient pallet storage.

If you require more detail or specific pricing information we encourage you to contact us directly to discuss your needs.

Our commentary

Accompanying the storage prices in the report is our commentary, which delves into the factors influencing the current state of the 3PL market. Our team of experts analyses various elements such as economic trends, industry developments, and regional dynamics to provide context to the reported figures. This commentary aims to empower our audience with a deeper understanding of the forces shaping the market.

Person in warehouse looking at clipboard with data on the computer screen next to them.

What factors influence a storage rate?

When determining a pallet storage rate, 3PL providers typically consider several factors related specifically to the storage aspect. uTenant’s 3PL Market Roundup only reports on standard ambient pallet storage for consistency, but it’s important to understand how the following key factors influence the storage rate:

> Pallet size: The storage rate per pallet will be influenced by the square metres each pallet occupies within the warehouse. For instance, if a pallet takes up more floor space due to its size or configuration (therefore not a standard AU pallet), the storage cost per pallet is likely to be higher (e.g. oversized pallet or furniture). Conversely, you may pay a lower storage price taking up less space (e.g. EU pallet). The same goes for pallet height, with conventional single selective racking beam heights being in the 1.4 – 1.6m range.

> Type of storage: Different types of storage configurations, such as bulk storage, rack storage, or specialised climate-controlled storage, will have varying costs associated with them that influence the storage rate.

> Storage density: Some warehouses are designed for high-density storage (narrow aisle, drive-in, double deep, satellite), allowing for more pallets in a given space. Higher storage density may lead to more efficient use of space and potentially lower storage rates, notwithstanding the potential higher cost for the racking itself. Normally, storage rates are set based on the total number of pallet storage positions available in a warehouse, with an allowance for operational efficiency (it’s difficult to run an efficient warehouse with every space full). The 3PL provider will set a baseline utilisation for pricing storage space, which is different for every layout and density.

> Storage duration: The length of time your products are stored can affect the price. Some providers offer tiered pricing based on storage duration, with longer-term contracted storage accompanied by good throughput forecasts often resulting in lower rates due to the certainty it brings in how the space will be used.

> Safety, security and insurance: Warehouses with higher safety standards and advanced security measures and insurance coverage may charge higher storage rates to cover these additional expenses and provide a controlled and secure storage environment.

> Warehouse location: The geographical location of the warehouse will influence the storage rate. Warehouses in prime locations with better transportation access command higher rates.

> Facility features: Warehouses with additional features such as specialised equipment, or environmentally controlled conditions will also affect storage rates.

When obtaining quotes for per-pallet storage costs, it's important to communicate your specific requirements, understand the terms of the agreement, and inquire about any additional fees that may apply. This ensures that you have a clear understanding of how each factor contributes to the overall per-pallet storage rate. Also important to note, some 3PL providers offer volume-based discounts. If you have a large volume of pallets to store, you may be eligible for a reduced storage rate.

Blog resource. What to look for in a 3PL quote. Click the image to be taken to the article.

The challenges of pricing storage for 3PL providers

3PL providers face several challenges when it comes to pricing storage services. These challenges stem from various factors, including market dynamics, operational complexities, customer demands and global events.

Factors such as supply and demand fluctuations, changes in property costs, and economic conditions are challenging influences on pricing storage services. A 3PL provider with a robust pricing strategy will build future expected storage utilisation into their storage rates to help offset the impacts of fluctuating market conditions, however, it’s not always easy to do.

One strategy is to create and use a balanced rate card. A balanced rate card is a transparent pricing structure designed to recover costs while ensuring profitability and competitiveness. It consists of standardised rates for various services, transparently outlining costs incurred by the 3PL provider and the value delivered to the client. These rates aim to cover direct and indirect costs, maintain a reasonable profit margin, and remain competitive in the market.

Overall, a balanced rate card serves as a foundational tool for pricing logistics services in a way that ensures profitability, competitiveness, transparency, and fairness for both the 3PL provider and its customers. It requires careful analysis of costs, market dynamics, client needs, and competitive positioning to strike the right balance between cost recovery and value delivery.

Operational complexities within a client’s scope of work also pose significant challenges when pricing storage services. These complexities can impact various aspects of the storage operation, including inventory management, handling requirements, and service levels, all of which influence the cost structure and pricing strategy.

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The next big challenge is forecasting and visibility of client needs. It directly impacts the operational efficiency, resource allocation, and overall profitability of the 3PL provider, therefore influencing the price of storage. Client demand forecasts may fluctuate due to unforeseen market changes, supply chain disruptions, or other external factors. Additionally, limited visibility into clients' long-term demand projections or inventory plans can hinder the ability of 3PL providers to align pricing with anticipated storage needs. To mitigate risk in this area, a proactive, collaborative and data-driven approach between a 3PL provider and client can enhance the effectiveness of storage pricing strategies and deliver greater value to clients.

Finally, if the last few years have shown us anything, the biggest challenge is dealing with the fall-out of global events (natural disasters, geopolitical tensions, pandemics, etc.). These events disrupt supply chains, lead to inventory fluctuations, volatility in demand, transportation constraints, and regulatory changes, overall impacting operational costs and affecting 3PL storage pricing.

Why we created the 3PL Market Roundup report

The uTenant 3PL Market Roundup serves multiple purposes:

1 . Informing Stakeholders: Businesses, investors, and industry professionals can use the report to stay informed about the current trends and pricing in the 3PL sector.

2. Strategic Decision-Making: Companies can leverage the insights provided to make informed decisions regarding warehousing and logistics strategies.

3. Market Transparency: By sharing our data and methodology, we contribute to the transparency of the 3PL market, fostering trust and understanding among industry participants.

4. Benchmarking: The report provides a benchmark for businesses to compare their own storage costs and strategies with the broader market, aiding in competitive analysis.

The uTenant 3PL Market Roundup is more than just numbers; it's a tool designed to empower businesses with the knowledge needed to navigate the complex landscape of pallet storage.

Moving forward, we will be publishing storage rates on a Quarterly basis, with commentary and insight reports every other month. We are committed to transparency, reliability, and providing valuable insights to our audience. As the 3PL market continues to evolve, so too will our commitment to delivering accurate and meaningful information in each Quarterly report.

If you have any questions or feedback, you can reach out to us here.

- uTenant PalletMatch Team

uTenant’s team of experts have extensive knowledge of and experience in supply chain and logistics operations. With its vast 3PL provider network, uTenant is able to match clients with warehouse space specific to their current or growing needs. To put it simply, uTenant's purpose-built PalletMatch platform matches those looking for warehouse space, with those who have it – across Australia and New Zealand. Get in touch with us today to find out more about PalletMatch and how it can help you.

If you have warehouse space to fill, get in touch with the uTenant team now.

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Published: 13 February 2024

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