Every client has different logistics needs. If your third-party logistics (3PL) company offers custom pricing, you need to analyze what clients need and offer prices that satisfy their requirements while still being reasonable. However, calculating 3PL service prices individually each time you get a new client takes a lot of time and effort.
3PL pricing templates are here to help you streamline that process. With a template, you can come up with quick cost estimates to show prospective clients to ensure you reach an agreement faster.
Keep reading for a complete rundown of 3PL pricing templates and what components you should include in them. You’ll also find a link to download our free 3PL pricing template!
What is a 3PL Pricing Template?
A 3PL pricing template is a document that helps you determine 3PL service costs. It usually comes in the form of a document or sheet where you can insert various cost items and find the total regular cost of your whole 3PL service.
This template generally includes essential cost items like inbound handling, receiving, storage and order fulfillment. Once you’ve plugged in the per unit price of each cost item, you can check with the prospective client how much of each service they need every month and the sheet will calculate the total costs for you. With a template, you can come up with a quote within minutes.
How is 3PL Pricing Calculated?
3PL pricing is calculated by summing up all the relevant cost components. Whatever the total of the inbound handling, receiving, storage and order fulfillment is your monthly 3PL cost for that client. This is the most common way to calculate 3PL pricing, but every logistics provider is unique. You might have extra cost items or considerations that may change how you calculate 3PL pricing.
As a 3PL company, you calculate 3PL pricing for clients. Accurately calculating 3PL pricing means understanding how many products they sell each month, so you can estimate the labor needed to handle their orders.
If you can’t correctly estimate the labor needed to handle your client’s logistics operations, you may overcharge or undercharge on service costs.
Components of a 3PL Pricing Template
What do you put in your 3PL pricing template? The answer differs for every logistics company, but there are common items you’ll find in just about all 3PL pricing templates. Here’s a look at each of them:
3PL Warehousing/Storage Fees
Warehousing and storage fees generally make up most of your 3PL pricing structure. This component encompasses receiving, unloading and storage costs for your client’s items.
Many 3PL companies have a tiered price structure for inventory unloading. Generally, unloading larger containers are more expensive than unloading pallets or cartons. This is because containers usually contain multiple pallets or cartons, which means more work to unload.
In addition to unloading, 3PL companies also charge receiving costs. This part of warehousing costs covers the work of inputting the items into the warehouse management system and moving them into the storage space. You can also charge extra for applying shrink wrap to keep the items safe.
The last part of storage fees is the storage charge itself. You can charge by space or by item stored. This cost is usually a recurring fee charged weekly. Some third-party logistics providers also rent pallets if the client ships items in cartons.
3PL Pick & Pack Fees
As the name implies, picking and packing fees cover the labor when you pick and pack the client’s products. 3PLs usually charge pick and pack fees per item or container, depending on the client’s needs. They also charge a processing fee for every order to be fulfilled.
In some larger orders, fulfillment companies can add shrink wrap as an extra expense for more protection when shipping packages. You can also apply bulk order discounts to improve client satisfaction.
3PL Shipping Fees
Shipping and transportation fees cover the cost of delivering your client’s products to customers. Your shipping rate can be based on volume, weight, or both combined. You may also offer different shipping rates for various delivery speeds, like two-day and regular deliveries.
If you work with multiple shipping carriers, you can include their names in the template so the client can choose whichever shipping partner works best for their needs and budget.
Setup and Account Management Fees
Before starting to work with a client, you need to set up a WMS and prepare everything for proper logistics management. This is where setup fees come in. It’s a one-time fee you charge when starting work with a new client and it’s usually based on the size of the client’s company and what kind of fulfillment services they need.
Account management fees include document storage, inventory reporting, shipping label printing and other costs required to keep your 3PL operations running. Account management fees are generally small and charged every month.
In addition to all the aforementioned cost items, you can include any additional charges in the pricing template. Additional costs include things like safety charges for storing hazardous materials and refrigeration expenses for perishable goods.
Some 3PL companies may charge seasonal adjustment costs. This cost compensates for the extra labor their team may need to handle the increased order volume during high-demand seasons.
Importance of a 3PL Pricing Template in Business
A 3PL pricing template is important in business because it helps you come up with price quotes faster. Instead of spending time calculating each cost item manually, you can input the price and quantity into the available slots and get an instant cost estimate. You may still need to adjust the final quote to fit the client’s needs, but it provides a great starting point when discussing a 3PL service offering.
Having all the cost items listed on the template also minimizes human error. If you accidentally skip a cost item in your 3PL service rate calculations, you may end up with an inaccurate quote for the prospective client
Transparency is also a good reason to use 3PL pricing templates. With a fixed template, the prospective client knows how much they have to pay for receiving, shipping and other expenses. This way, they’re more likely to trust your company since they know what they’ll pay for when using your services.
3PL Pricing Models
Every client has their preference for 3PL pricing models. Some prefer fixed-price 3PL services, while others think variable pricing is better for their finances. Plus, there’s the Amazon FBA model that has fixed pricing and profit sharing.
How does each pricing model work and what are its benefits and caveats? Let’s take a look:
Fixed Pricing Model
A fixed pricing model is just as the name implies. Clients pay a set cost to get all your 3PL services. Businesses usually prefer a fixed pricing model if they want to eliminate uncertainty about their 3PL costs. The pricing model’s predictability also helps small businesses and companies with thin profit margins stay within budget.
On your side of the deal, using a fixed pricing model fosters a partnership between your company and the client. If you provide excellent 3PL service, your client may see they’re getting more bang for their buck. Additionally, a fixed-price model ensures you get the same amount of money each month regardless of how well the client’s products sell.
However, there is a downside to fixed pricing models. Applying a fixed pricing model means you might take on more work than what the income is worth if the partner company keeps growing. In these cases, you may need to renegotiate the monthly cost with the client to ensure the 3PL company and the client get the most out of this partnership.
Variable Pricing Model
A variable pricing model is more commonly used by 3PL companies. Clients often prefer variable rates because they know what they’ll be paying for and can adjust their business operations accordingly. For instance, your client can reduce items shipped to your warehouse if they don’t have enough money to store all of them.
A 3PL pricing template works best when you use variable pricing because you can adjust cost items according to the client’s needs. Using a 3PL pricing template to outline your variable pricing also builds trust since the document covers everything the client is about to pay, ensuring hidden costs won’t blindside them.
The downside to variable pricing models for the client is that it adds a level of unpredictability since how much they pay is determined by their sales. This unpredictability might be a dealbreaker for small businesses wanting to make every dollar count.
Variable pricing models also add a layer of unpredictability on your end since how much you make depends on the client’s sales. You might receive less money during low-demand periods since the client isn’t selling as many goods as they do regularly.
Amazon FBA “Fixed-Pricing-Profit Sharing” Pricing Model
Another pricing model that’s worth noting is the Fulfillment by Amazon (FBA) pricing model. This pricing model works somewhat like a fixed-price model. Sellers pay a regular 3PL services fee, but they also pay a “selling on Amazon fee,” that’s around 15% of the profit margin.
15% of the seller’s profit on top of the fixed fulfillment fees sounds pretty steep. However, sellers sometimes prefer to fulfill orders through Amazon because they can reach a larger audience, use Amazon’s ready-made storefront and potentially gain more sales.
Plus, Amazon is known for its vast fulfillment network. There are over 170 Amazon fulfillment centers and warehouses worldwide, so sellers can sell internationally rather than just domestically. With a large enough customer base, they can offset the increased fulfillment costs of using Amazon FBA.
Another thing sellers need to know about Amazon FBA is its no-questions return policy. Once they sign up for Amazon FBA, they may see an increase in returns.
A 3PL pricing template is a document that assists in calculating 3PL service costs. It contains fillable cost items that you can modify according to the client’s needs, making it much easier to determine how much you’ll charge them.
Your pricing template does more than just help you determine service costs. It also promotes transparency and builds client trust because everything they’ll be paying for is listed on the template, meaning everything is above the board and hidden costs won’t blindside them.
As a 3PL company, you need a robust warehouse management system to ensure you provide the best services to clients. ShipHero’s WMS improves order accuracy, reduces warehouse costs and much more. Contact us today to learn how our WMS can help you succeed.
Frequently Asked Questions (FAQs)
What are the Advantages of Using a 3PL Pricing Template?
The advantages of using a 3PL pricing template include increased transparency, reduced human error and faster cost calculations. All three things build client trust because everything is on the table and clients can trust that there won’t be any hidden costs that surprise them once they start working with you.
How Can I Choose the Right Pricing Model for My Business?
You can choose the right pricing model for your business by examining your client base first. Small businesses and companies with thin profit margins usually prefer flat-rate pricing because there are fewer surprises. Meanwhile, companies selling products with fluctuating demand might fare better with variable-rate pricing.
Each pricing model has its own pros and cons, so research your clients well and choose the most cost-effective pricing model that suits your capabilities.
What is the Impact of a 3PL Pricing Template on Cost Efficiency?
A 3PL pricing template helps you improve cost efficiency because it’s easier to review the client’s entire cost structure once the template’s been filled out. You can examine potential overspending and give the client suggestions on how to increase your 3PL services’ cost efficiency.