3PL Billing: The Ultimate Guide to eCommerce Fulfillment Pricing

Fulfillment pricing is a crucial aspect of any eCommerce business that relies on third-party logistics providers to handle their order fulfillment. A well-structured fulfillment pricing strategy can help businesses optimize their costs and improve their bottom line. However, with so many factors that go into determining fulfillment pricing, it can be challenging to understand the different approaches to pricing, the elements that make up fulfillment pricing, and the price ranges that businesses can expect to encounter. In this article, we'll break down the different elements that contribute to fulfillment pricing, the price ranges you can expect to see, and the different approaches to price discounts and competitiveness that businesses can adopt to optimize their fulfillment costs.

Pricing Elements

Fulfillment pricing is a complex beast with many different factors that go into determining the final cost. Understanding each of these factors is critical for businesses that rely on third-party logistics providers for order fulfillment. In this section, we'll take a deep dive into the most popular fulfillment pricing elements that businesses can expect to encounter.

• Pick and Pack
• Receiving
• Storage
• Packaging
• Returns
• Special Projects
• Shipping Labels (Carriers)
• Miscellaneous Fees

By the end of this section, you'll have a comprehensive understanding of the different elements that make up fulfillment pricing, and you'll be better equipped to make informed decisions about which fulfillment provider is the best fit for your business needs.

Pick and Pack

Pick and pack pricing is a critical component of the billing process for third-party logistics providers. This element refers to the cost of retrieving and preparing individual items from a warehouse to fulfill an order. Typically, this pricing model is based on a per-unit basis, where the more units ordered, the lower the price per unit will be. The pick and pack process can be labor-intensive, especially for larger orders or those with multiple SKUs, so it's essential to understand how this fee is calculated when selecting a fulfillment provider. The complexity and variability of this pricing model make it crucial to negotiate pick and pack pricing with potential fulfillment providers to ensure a fair and competitive rate.

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Receiving

Receiving fees are another essential element of e-commerce fulfillment billing that businesses should be aware of when selecting a 3PL provider. This fee refers to the cost of receiving and processing inventory into a fulfillment center. Receiving fees are typically charged on a per-pallet or per-carton basis, with some providers charging a flat rate for small shipments. Depending on the provider, receiving fees may also include additional services such as product inspection, quality control, and inventory tracking. It's important to understand the receiving fee structure of a fulfillment provider to ensure that there are no surprises when it comes time to invoice. Negotiating this fee with potential providers can be beneficial to ensure that you are receiving a fair and competitive rate

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Storage

Storage fees are a critical pricing element for ecommerce fulfillment billing that businesses should be aware of when selecting a 3PL provider. This fee refers to the cost of storing inventory in a fulfillment center. Typically, storage fees are charged based on the volume of space that a company's products occupy within the warehouse. The pricing structure for storage fees can vary depending on the fulfillment provider. Some providers may charge per pallet, while others may charge per shelf or bin. It's important to understand the storage fee structure of a fulfillment provider to ensure that there are no surprises when it comes time to invoice. For example, a provider may offer pallet storage for $30, shelf storage for $8, and bin storage for $3 per unit. Additionally, it's worth noting that storage fees are typically charged at the end of the month, so it's important to factor this cost into your budgeting and forecasting.

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Packaging

Packaging fees are a critical pricing element for ecommerce fulfillment billing that businesses should consider when selecting a 3PL provider. This fee refers to the cost of packaging materials used to prepare orders for shipment. Depending on the provider, packaging fees may be charged on a per-item basis or a per-order basis. Some providers may offer a flat rate for packaging materials, while others may charge based on the weight or volume of the order. Understanding the packaging fee structure of a fulfillment provider is important to ensure that you are not overpaying for materials or services that you do not need. It's worth noting that some providers may offer customized packaging options or branded packaging solutions, which can be beneficial for businesses looking to enhance their brand image. As with other pricing elements, negotiating packaging fees with potential providers can be helpful to ensure that you are receiving a fair and competitive rate.

Returns

Returns fees are another pricing element that ecommerce businesses should consider when selecting a 3PL provider. This fee refers to the cost of processing and managing returned items. Depending on the provider, returns fees may be charged on a per-item basis or a per-order basis. Some providers may offer a flat rate for returns processing, while others may charge based on the reason for the return, such as a restocking fee or damage assessment fee. Understanding the returns fee structure of a fulfillment provider is important to ensure that you are not overpaying for returns processing or facing unexpected charges. Additionally, some providers may offer value-added services for returns, such as product refurbishment or resale, which can be beneficial for businesses looking to maximize the value of returned items. As with other pricing elements, negotiating returns fees with potential providers can be helpful to ensure that you are receiving a fair and competitive rate.

Special Projects

Special project fees are another pricing element that ecommerce businesses should consider when selecting a 3PL provider. This fee refers to the cost of special projects or one-time services that fall outside of standard fulfillment activities. Special project fees are typically billed on an hourly basis and can range from $40 to $60 per hour, depending on the provider. Some examples of special projects that may incur additional fees include FBA prep, custom kitting, handwritten notes, repalletization, or any other non-standard activities that require additional resources or labor. It's important to understand the fee structure for special projects and to discuss any potential projects with your fulfillment provider to ensure that you are aware of the associated costs. Additionally, negotiating special project fees with potential providers can be beneficial to ensure that you are receiving a fair and competitive rate.

Shipping Labels (Carriers)

Carrier rates are an important pricing element for ecommerce fulfillment billing. The most popular carriers in the United States are USPS, DHL eCommerce, FedEx, and UPS, and different 3PLs will have different negotiated rates with these carriers based on their shipping volume and the geography of their 3PL facility. It's important to note that 3PLs have the ability to mark up their negotiated rates, so it's essential to understand whether your 3PL is marking up the rates they pass on to you or not. Some 3PLs may have better discounts for smaller packages, while others may have better discounts for larger packages, so it's important to choose your 3PL accordingly based on your shipping needs. Understanding the carrier rate structure and negotiating rates with potential providers can help ensure that you are receiving a fair and competitive rate for carrier rates.

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Miscellaneous Fees

In addition to the more common pricing elements, some 3PLs may charge miscellaneous fees for services such as onboarding, customer service, software, and integration. Onboarding fees are usually a one-time fee charged for setting up your account and getting your products integrated into the 3PL's system. Customer service fees may be charged if you require additional support or services beyond what is included in your agreement. Software fees may be charged for the use of the 3PL's proprietary software, and integration fees may be charged if you require additional integration services beyond what is included in your agreement. It's essential to carefully review your agreement with your 3PL to understand which services are included and which may incur additional fees. Additionally, it's important to compare these miscellaneous fees among different 3PLs to ensure that you are receiving a fair and competitive price.

Good vs Bad Pricing

Third-party logistics providers (3PLs) offer a wide range of services to businesses, including transportation, warehousing, and supply chain management. Pricing is an essential aspect of 3PL services, as it directly affects the profitability and competitiveness of both the 3PL and its clients. Here's a breakdown of good vs. bad pricing for 3PLs:

Good Pricing for 3PLs

• Transparent: Pricing should be transparent and clearly communicated to clients, without any hidden fees or surprise charges. 3PLs should be upfront about their rates and any additional costs that may apply.
• Competitive: Good pricing should be competitive and reflect the current market rates for similar services. 3PLs that offer reasonable rates will attract more clients and retain them over time.
• Customizable: Pricing should be customizable, depending on the specific needs of each client. A good 3PL will work with its clients to tailor services and pricing to meet their unique needs.
• Value-based: Pricing should reflect the value that the 3PL brings to its clients. A good 3PL will provide additional value beyond just transportation or warehousing, such as supply chain optimization, risk management, and other value-added services.

Bad Pricing for 3PLs

• Hidden fees: Hidden fees or surprise charges can erode trust between 3PLs and their clients. Clients should be aware of all costs upfront to make informed decisions.
• Uncompetitive: Uncompetitive pricing can make it difficult for 3PLs to attract and retain clients. Clients may seek out lower-priced options, leading to a loss of business for the 3PL.
• Inflexible: Pricing should be flexible and adaptable to changing client needs. An inflexible pricing structure can make it difficult for clients to scale their operations or adjust to market changes.
• Lack of value: Pricing that doesn't reflect the value of services provided can result in clients feeling like they are overpaying for subpar service. This can lead to dissatisfaction and eventually losing business.

Overall, good pricing for 3PLs should be transparent, competitive, customizable, and reflect the value of services provided. Bad pricing, on the other hand, can be characterized by hidden fees, uncompetitive rates, inflexibility, and a lack of value. 3PLs that offer fair and reasonable pricing while delivering high-quality services will be more likely to attract and retain clients over time.

Price Ranges in the United States

Pricing for eCommerce fulfillment services can widely vary by 3PL AND by eCommerce brand. It is also extremely important to note that in order to accurately compare one 3PLs price to another you need to know the true all-in cost of working with both 3PLs. 

The way you calculate this is by doing a side-by-side analysis of every pricing component mentioned above. We have created a tool to make it easy to compare multiple 3PLs you can access for free here: (insert link to RFP document comparison template). 

With all of these caveats in mind, let’s take a look at the most common variables for price fluctuation:

Geography:

A 3PL located in the Los Angeles or New York City area will charge between $25-$55 per pallet per month for storage charges. We have seen monthly pallet fees for as low as $6 per month in other states. The national average we see for monthly pallet storage charges is $15-$20 per month per pallet.

Carrier Rates:

Some 3PLs will have much better negotiated carrier rates than others. To go even further, some 3PLs will have great small parcel rates and not-so-great big and bulky rates (and vice versa). Make sure you review the carrier rates of prospective 3PLs diligently in order to make sure you are not over paying for shipping labels. 

Order to SKU ratio:

High monthly order volume + low SKU count = ideal customer for 3PLs. Why? The fulfillment complexity is much lower which means more orders can be shipped per hour and more profitability for the 3PL. Customers that have a favorable order to SKU ratio have more leverage to negotiate better pick and pack rates. We have seen customers doing 10,000+ orders per month with single digit SKUs be able to squeeze out a $1.00 per order fee with $.10 for each additional pick. That’s cheap! But again, remember that all-in pricing is the real measure of good vs. bad pricing.

Weight:

The higher the weight = the higher the pick + pack fees. For orders that ship out at 30-50 pounds we are seeing pick + pack pricing from $4-$10 per order + additional per pick depending on the scope of the customer.

Specialty:

Does the brand’s shipping requirements fall under a special classification? For example, niches like Hazmat, cold storage, big and bulky, print on demand, etc. all have increased charges and additional pricing components because of the more custom nature of the warehousing and fulfillment.

How To Reduce Fulfillment Costs

Fulfill.com's CEO recorded this video below to talk through best practice in lowering fulfillment costs without sacrificing quality:
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Conclusion

In conclusion, eCommerce fulfillment pricing can be a complex and confusing topic for businesses to navigate. With so many variables to consider, it can be challenging to find the right 3PL that meets all of your needs while also being cost-effective. Fortunately, businesses don't have to go it alone. The team at Fulfill.com is dedicated to helping businesses find the right 3PL for their needs. With our warehouse search tool, businesses can quickly and easily compare different 3PLs and find one that is cheaper, faster, and of better quality. Plus, our services are provided at no cost to our clients. So, if you're struggling to find the right 3PL for your eCommerce business, don't hesitate to reach out to the team at Fulfill.com to get started today.