As a Third-Party Logistics (3PL) provider, optimising storage rates requires a strategic approach that considers various factors, including location, infrastructure, utilisation, service offerings, and market dynamics.

Just as important for Product Owners (Brands), is understanding how 3PL providers formulate their storage quotes. It's crucial for budgeting effectively and making informed decisions about your logistics operations. When determining a storage rate, 3PL providers typically consider several factors related specifically to the storage aspect within the scope of work, so it helps to have an understanding of the factors at play.

In this guide, we'll break down the key factors that influence storage rates, empowering you to understand the pricing structure and negotiate favourable terms for your storage needs.

7 key factors that influence storage prices

1. 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.

2. 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. This is because different types of storage (and pick-and-pack) require different operational input, may require a different storage configuration (affecting how much square metre space is taken up in the warehouse), different amount or type of labour, and may require different MHE (material handling equipment).

3. 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.

4. 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.

5. 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.

6. Warehouse location

The geographical location of the warehouse will influence the storage rate. Just like homes located in suburbs of high demand, warehouses in prime locations and with better transportation access command higher rates.

7. Facility features

Warehouses with additional features such as specialised equipment, sustainability features, or environmentally controlled conditions will also affect storage rates. For example, a cold storage warehousing solution can cost twice the price of an ambient storage solution, per pallet.

When obtaining quotes for 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 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.

Seek the advice of an expert to better understand the factors that influence a storage rate

uTenant helps to match you with a suitable 3PL provider that has the capability to service your requirements. We help explain storage rates and different services so you can make an informed decision. Contact us today to learn more about our 3PL storage matching service and how we can help you optimise your logistics operations.

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Published: 19 February 2024