Ahhh, good question. And as an eCommerce fulfillment company, this is a common one that we hear. Merchants want to know exactly how they’ll be charged to store their inventory in our fulfillment center. There is often confusion around this topic because the way that inventory storage fees work do vary from one company to the next.

The most commonly-used methods for pricing inventory storage is to charge by cubic foot, by pallet, by SKU, or a combination of the three. So let’s go over these different methods and discuss their differences.

#### Per Cubic Foot

Some fulfillment houses base their storage fees on the number of cubic feet that their items, or SKUs, occupy. To calculate cubic feet, you multiply the length, width and height of an item.

Let’s say you sell books. One of your books measures 6 x 9 x 1 inches. In this case, the book is 54 cubic inches. There are 1,728 cubic inches in a cubic foot, which means that, if a fulfillment house charges by the cubic foot for storage, you would divide 54 by 1,728 to determine the cubic feet of your book, then multiply by the rate charged per cubic foot.

Here’s an example. Let’s say a fulfillment house charges $0.30 per cubic foot for storage, per month. For one book, your fee would be 54/1728 x $0.30 = **$0.009 per month**. To store 1,000 copies of this book, your fee would be 54/1728 x $0.30 x 1000 = **$9.38 per month**.

An important consideration with this model is if and how the fulfillment house rounds their measurements. For example, many companies will round up to the next full inch when calculating the LxWxH dimensions of an item. That can make a significant difference with your storage bill.

#### Per Pallet

It is also common to charge by the pallet for storage, rather than by each individual SKU. For example, a fulfillment house may have a monthly charge of $17 per pallet. The average pallet size is 48” x 48” x 48”, which is 110,592 cubic inches, or 64 cubic feet. So to store one book, your fee would be 54/110592 x $17 = **$0.008 per month**. To store 1,000 copies, your fee would be 54/110592 x $17 x 1000 = **$8.30 per month**.

You can see that in this scenario, it’s a little cheaper by the pallet, but that’s not always the case. There are a few important considerations:

**1. Pallet Size**

The average pallet size is 64 cubic feet; however, some fulfillment warehouses will use industrial-sized pallets, which measure 42” x 48” x 48”, or 56 cubic feet.

**2. Items Per Pallet**

Not all items fit neatly on a pallet. So even though, when calculated, it seems your 2,000 items will fit on one pallet, that may not be the case, and you may actually wind up paying for two pallets.

**3. Restrictions**

Some fulfillment companies have low storage rates per pallet, but only allow one unique item or SKU per pallet. So if you have 10 SKUs, even though your total inventory may fit on 5 pallets, in this case you’ll actually be paying for 10 pallets worth of storage.

#### Per SKU

A third common method used is to charge for storage by the SKU. For instance, you may have a monthly charge of $2.00 for each individual SKU you have in stock. This method may be used in combination with a per pallet storage fee. For example, a monthly charge of $2.00 for each SKU, on top of a per pallet storage fee of $17.

It’s important to consider **when** storage fees are calculated. At eFulfillment Service, we charge storage based on end-of-week item counts. This method rewards our clients for items we receive and ship in the same week, essentially resulting in free storage for those items. This is not the case with all fulfillment companies, so make sure you have a good grasp on both **how** and **when** storage is calculated and charged, as well as how you can verify that the charges are accurate.

Lastly, when researching fulfillment houses, it may appear in some cases that you have very little to no storage fees. It is not uncommon for some companies to bake storage fees into their “fulfillment” or “order processing” fees, so make sure to look at the **total cost of fulfillment** on a per item basis.

Curious about our storage and fulfillment fees for your company? Tell us a little about your business and we’ll send you a free quote.

Tags: faqs, inventory storage, order fulfillment, outsource fulfillment

how do companies then cover their costs for the aisles in between the racks

these take up sq ft space and have to be charged

Hi John, good question, and you bring up a good point that it does in fact cost the order fulfillment company money for that aisle space. It is common for fulfillment companies to simply account for that space with their storage fees. So for example, if a piece of bin shelving takes up 32 square feet of warehouse space, and there is an additional 32 square feet of space surrounding that shelving which is required for aisleway, the company will set their storage fees to cover expenses they incur on 64 cubic feet.

This is a very interesting and useful exercise so thank you.

Calculating monthly renewed storage on a cubic feet basis.

Can you elaborate on the charges (cost)that would make up a storage fee?

Would you include the depreciation cost of an asset (forklift, racking, etc.)? Would you include the cost for 24/7 security guard?

Last question, would the cost calculation be different when calculating bulk storage as oppose to rack storage?

Thank you.

Hi Michael, thanks for the comment and questions. Regarding the depreciation of assets and cost of security, those are operating expenses that we do incur, but when you outsource order fulfillment to eFulfillment Service, the nice thing is that, as an ecommerce seller, those are things you do not have to worry about. We also do not charge separate rates for bulk versus rack storage. We have always tried to keep our pricing as simple and straightforward as possible, without any tricky fees.

If I am paying for storage on a per pallet basis, how is that calculated per month as the number of pallets will fluctuate daily with new arrivals and product being sent out?

Hi Chris,

Thank you for your comment. And good question. With eFulfillment Service, you are not charged on a per pallet basis, which is the case with many order fulfillment companies. Instead, we calculate the actual inventory that you have on hand each week to determine your storage costs. This ensures that you do not overpay for warehouse space that you’re not utilizing. As we fulfill orders throughout the week, inventory will of course be depleted, and your storage costs will go down.

I hope this helps.

Thanks,

Steve Bulger

We have a potential account that has asked us to warehouse and ship corrugated boxes by SKU for them. We have to provide the man power and equipment to provide this service. What is the best way of determining the cost per month, per pallet, etc. to receive, sort and re-palletize and ship their product?

Hi Paula –

Thank you for the comment! You ask a great question. Effective warehousing and order fulfillment is ultimately a matter of appropriately and efficiently managing labor in combination with having the right technology and metrics. If this is a new order fulfillment job, you will likely have to make some assumptions based on time estimates and materials for each task. I am happy to provide you with more information. Please feel free to email me at sales@efulfillmentservice.com.

Thanks!

Steve Bulger