What You Need To Know About 3PL Pricing Structures

How your 3PL charges for storage, fulfillment, transportation, and other services can greatly impact your business and overall supply chain. 3PL pricing varies from provider to provider, and also from brand to brand. Brands have different needs from their 3PLs, varying from core fulfillment services to labor intensive value-added services. Let’s dive into the unique pricing structures of 3PLs used to meet the diverse needs of brands. 

3PL Pricing Structures

The right model can save you time, effort, and money that can be invested back into your company. What are the two main pricing structures that 3PLs use?

Variable 3PL Pricing

Variable models are priced based on the exact services that are rendered. This model is going to be similar to ordering a la carte at a restaurant. You pick each item/service that you want, and pay for what you choose.

Here are some of the fees and rates you could see if you opt for a provider with variable pricing:

• Set-Up Fee - Fees for the initial setup of software, training the 3PL or company team, and overall infrastructure. 
• Receiving Fees - Charges for accepting and processing incoming shipments from suppliers or manufacturers.
• Storage Fee - Sometimes called a warehousing fee, a charge for the space where items are being stored. 
• Pick & Pack Fee - Sometimes called a fulfillment fee, a fee for picking the items out of storage and getting them ready for shipping. 
• Miscellaneous Fees - A typically negotiable fee that covers anything from kitting to special packaging, and everything in between. If you have a complicated subscription box or something that is highly specialized, this fee will likely go up.
• Customer Service Fee - Any communications between your customers and the 3PL will likely incur a charge. This could be a flat fee or charged by claim. 
• Reverse Logistics Fee - This charge would cover returns, refunds, and restocking products. If you sell a product that needs to be recycled or refilled, you will likely see this fee go up.
• Seasonality Fees & Adjustments - Some 3PLs charge for overtime or holiday work. 

With all fees, you should talk with your 3PL before signing a contract so that you know exactly what each charge entails. This open communication will help you avoid any surprise fees that could be detrimental to your business. 

Clients like variable pricing because they can easily adjust their business operations to pay more or less as needed. They don’t love that the pricing can be unpredictable. For example, if a business sells more than expected, their bill will exceed their original estimate. 3PLs also face uncertainty as clients adjust their needs based on sales demand.

Flat Rate 3PL Pricing

Flat rate models (sometimes called fixed rate models) are just as they sound, businesses pay a flat rate charge per order or month. This fee will encompass all services, which could include warehousing, fulfillment, kitting, packaging, shipping, customer service, reverse logistics, and so on. 

A flat rate model ensures the client knows exactly what they will pay each month, and the 3PL knows exactly how much money they will bring in. Sometimes you need to negotiate further to ensure the partnership is fair in flat rate models. The 3PL could end up doing more work than what they are being paid to do, so it is important to ensure the 3PL and client work together to get the most out of the partnership. 

Which is right for my business?

When choosing a 3PL and a pricing model, it is important to examine your client base and decide what your priorities are. 

• Client base - If you are a small business or a company with a low profit margin, you may like a flat rate model better since there shouldn’t be any surprise fees. Companies with fluctuating demand may like a variable model better so they can adjust with their current needs.
• Priorities - Do you want to be able to negotiate heavily to get the price you want? If yes, a variable rate model may be better for you. Do you prefer consistency and steadiness? In that case, a flat rate model will be better so that you know exactly what to expect each pay period. 

Some 3PLs have a mix of a flat rate and variable pricing model, where clients pay one flat fee and then can add on services as needed. There are different names for different pricing models but at the end of the day it comes down to this - you will either pay a flat rate, pay per service/action, or have some sort of hybrid model. 

No matter which pricing model your 3PL has, partnering with a 3PL will allow you to spend more time focused on your product and overall branding. Once you find a 3PL with the right pricing model for you, your business can (and will) save time, effort, and money that can be invested right back into your company.