Problems with maintaining a stable supply chain in a company can lead to further difficulties, such as maintaining financial liquidity or ensuring timely delivery of goods to customers. If you are already running a business connected with distance selling and logistics, you should ensure that all company processes are optimized as effectively as possible and reduce transportation and warehousing expenses. See how much warehousing costs in practice and what you can do to minimize your company’s expenditures.
Warehousing goods and logistics costs – What should you know?
The total logistics costs in the context of warehousing goods depend on many factors that influence both operational and strategic decisions within the company. These costs encompass a wide range of expenses, from material to non-material costs, including utility fees, labor costs, and depreciation of warehouse equipment.
Material costs include the consumption of energy, fuel, and consumables necessary for the functioning of the warehouses. Non-material costs cover employee wages and the costs of invested capital, which are directly related to financing logistics operations. Logistics costs also include taxes and administrative fees, which impact the profitability of operations.
Types of warehousing costs:
- Depreciation of warehouse equipment and infrastructure,
- Fuel and energy consumption in warehouses,
- Wages for warehouse employees,
- Costs of external logistics services (transport, forwarding),
- Inventory-related costs, including insurance and capital management.
These costs can also be considered in terms of the flow phases of goods, such as procurement, production, and distribution. Each of these phases generates specific costs related to warehouse operations, internal and external transportation, and managing the flow of information.
We also need to understand how individual costs affect the overall efficiency of logistics. This knowledge allows for the optimization of processes and the reduction of expenses related to warehousing and repackaging goods, for example, within the framework of logistics consolidation services.
What factors most influence the costs of warehousing goods?
The cost of warehousing a single item depends on various variables that shape the final price. These include both aspects directly related to handling the goods and general factors concerning the warehouse’s operation.
- Warehouse space: The cost of renting or building warehouse space depends on how much space you need. The larger and more demanding the goods, the more space is required, not only for storage but also for logistical handling, such as loading and unloading. Larger spaces mean higher operational costs related to warehouse maintenance.
- Warehouse equipment: Maintaining a warehouse is not just about rental costs but also involves investment in necessary equipment and systems. These costs include purchasing equipment, maintenance, and repairs. Essential elements include forklifts, warehouse racks, computers, scanners, and door and gate systems.
- Warehousing services and personnel costs: Warehouse operations such as loading, unloading, order picking, and packaging also affect the final cost of warehousing. Additionally, wages for warehouse staff, their training, and insurance are a significant portion of expenses. These costs increase proportionally with the complexity of operations and the number of employees hired.
- System management and insurance: Modern warehouses require advanced IT systems to manage goods and orders. The costs of licenses, implementation, and maintenance of Warehouse Management Systems (WMS) can significantly impact the budget.
Warehousing costs depend on many factors, especially those listed above. It’s essential to pay attention not only to direct expenses related to warehouse rental and operations but also to hidden costs associated with operational errors or equipment failures. Efficient management of all these aspects will help minimize warehousing costs and increase the profitability of your business.
Operational costs and warehousing expenses – Industry insights worth knowing!
Optimizing the warehousing of goods is crucial for reducing operational costs and improving logistics efficiency. There are several strategies that can be implemented to lower warehousing costs and effectively utilize space.
A good way to optimize is by reducing the width of aisles between racks. Narrower aisles allow for more racks to fit in the same space, increasing warehouse capacity. However, this change may require adapting equipment, such as forklifts with a smaller turning radius, which could generate additional costs.
It is also worth analyzing inventory structure. Storing dead stock that rarely rotates takes up valuable space that could be better used for storing more frequently rotating products. A solution could be selling off excess inventory or transferring it to external warehouses.
How can you calculate and estimate warehousing costs in logistics?
Calculating the costs associated with warehousing goods on your own is possible but requires considerable time. If you want to find out how much your company will pay for storing goods in warehouses, you need to consider:
- The number of pallet spaces occupied,
- The total warehouse space reserved for the company,
- The number of racks and shelves occupied,
- The number of rooms designated for warehouse operations and packaging.
Warehousing costs can be estimated using several basic components. The most commonly used formula in logistics is the inventory holding cost formula, which takes into account elements such as:
Storage cost = average inventory value × inventory holding cost rate
For example: Suppose a company has an average inventory value of 1,000,000 PLN, and the annual holding cost rate is 25%. This means the company will spend 250,000 PLN annually on inventory holding if no changes are made to the warehousing policy.
The best methods to reduce warehousing costs – How to do it smartly (and well)?
If you’re serious about optimizing expenses related to warehousing goods, you should first dedicate ample time to analyzing the company’s situation and implementing new technologies such as warehouse management systems.
A good and effective way to reduce storage costs is to use services known as Fulfillment. These solutions allow you to use an external logistics operator for warehouse space rental as well as for outsourcing the entire process related to packaging and shipping goods to a fulfillment operator.
By opting for such solutions, you:
- Spread operational and storage costs across multiple clients,
- Reduce warehouse staff, equipment, and maintenance costs to zero,
- Avoid expenses related to purchasing warehouse software.
To reduce warehousing costs, it is essential to use the services of a reliable logistics operator. This is key if you care about fast shipping, minimizing errors, and reducing warehousing costs at the same time.