How to calculate warehouse storage costs?

How to calculate warehouse storage costs?

So, you thought it was easy to calculate warehouse storage costs? One of the most unavoidable costs for any enterprise, from a small entrepreneurship looking to expand to a mammoth company on top of the profit charts is warehouse storage cost. Users of warehouses should be well aware of the costs involved and know whether they are being charged extra for a service that they should be paying much less for. Knowing this is key to financial planning, as well as logistics and inventory planning.

So, what are the factors to be considered when you calculate warehouse storage costs?

1.      Location

This is probably the most important factor. Does the warehouse have access to major market sites that are important for your products? Does it have multiple branches so that you can quickly spread your inventory if need be? It costs more to have access to major areas. Access to trucking hubs, rail lines, interstates, or airports also have direct bearing on these costs. You pay for access.

2.      Value added services

The warehouse may just be storing things for you, or it may be taking care of the entire process of handling your inventory once it lands, the docks, counting it, storing it and packing and delivering it at the right place. Your cost will depend on what additional services you use.

3.      Stocking and pulling

Handling fees for your warehouse comes under this. The charges that are levied for loading or unloading and packaging are also to be considered. You need to see what are the total charges you will incur for stocking.

4.      Terms

Can you lease a certain space for a specified long period to reduce cost per unit? Also, are you required to sign a contract or can you lease storage space as and when needed?

5.      Other conditions

Under this can be clubbed volume and warehouse conditions – how often do you need to turn your stock? Are you using the warehouse for long term or short term storage? Is the warehouse well-lit, air-conditioned (depending on your goods), secure? Is it capable of executive visits or is it just a dusty storage lot?

How to calculate warehouse storage costs:

  1. Well, the first thing you need to do is calculate the capacity of the warehouse in square feet. Do this by measuring the outside walls of the warehouse. Include all area for which you are paying, including projections and renovations.  Once you have completed the measurement, calculate the number of square feet in the warehouse.
  2. Review the financial statements to determine the expenses incurred by the warehouse during the past year. This will include rent, utilities, security outsourcing costs, payroll expenses; amongst others.
  3. Divide the total expenses incurred by the warehouse by the number of square feet in the warehouse.
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