3PL Pricing – Why You Won’t Find Standard Pricing?

Prospect: “Just send us a rate card/pricing.”

a2b: “Our 3PL pricing is customized. There are many factors that go into 3PL pricing, so we don’t have a rate card.”

Prospect: “Just send me your pricing. We won’t consider you as a fulfillment partner if we don’t have pricing.”

a2b: “3PL pricing is customized. It depends on volume, value-added services, and package dimensions. We cannot provide you with accurate pricing without taking these into consideration.”

Prospect: “Thanks.” Hangs up.

In the infamous words of Queen, “Another one bites the dust.”

This type of conversation happens multiple times daily.

3PL pricing is unique. It is dependent on various factors. And to convolute the matter more, there are several different pricing models.

‍3PL Pricing – What Are the Models?

In the fast-paced world of eCommerce, order fulfillment is the backbone of success. It’s far more than just picking, packing, and shipping - it’s a complex process that can make or break a business. As companies grow, many turn to third-party logistics providers (3PLs) not only for efficiency but also to manage fulfillment costs effectively. Outsourcing fulfillment can free up resources, save money, and allow businesses to focus on what matters most: strategic growth.

At a2b, our pricing is customized to fit each client’s unique needs. Why? Because no two products - or businesses - are the same. Pricing a 10x10x10, 5-pound box is vastly different from pricing a lightweight 5-ounce polybag. And it’s not just size and weight that determine costs - there’s much more to consider. Since fulfillment pricing varies across 3PLs, comparing costs can feel like comparing apples to oranges.

So, where do you start? The first step is understanding your current fulfillment costs.

How to Calculate Your Fulfillment Costs

Before you dive into the RFP process or consider outsourcing fulfillment, you need a clear picture of what fulfillment costs you today, whether you handle it in-house or are working with a 3PL. To get this number, tally up the following expenses

• Warehouse Receiving: Costs tied to accepting and processing incoming inventory.
• Inventory Costs (Storage): Fees for keeping your products in a warehouse.
• Picking and Packing: Labor and resources needed to prepare orders.
• Packaging: Standard or custom materials used to ship your goods.
• Kitting/Value-Added Services: Extra steps like bundling or assembly.
• Return Management/Reverse Logistics: Handling returns efficiently.
• Shipping Costs: The price of getting orders to your customers.

If you manage fulfillment in-house, add these additional costs:

• Labor: Wages for your warehouse team.
• Lease and Utilities: Rent for your facility as well as electric, gas, water, and maintenance costs
• Software and IT Systems: Tools to manage operations.
• Warehouse Racking: Shelving and storage infrastructure.
• Automation and Robotics: Investments in cutting-edge tech.

Once you’ve crunched these numbers, you’ll have a solid grasp of your fulfillment expenses. With this insight, you face a choice: optimize your current setup or outsource to a 3PL.

Benefits of in-house Fulfillment

In-house fulfillment gives you full command of the order process, i.e., to customize packaging, tackle problems quickly, and manage products that need extra attention. That said, it might not scale as smoothly or cost effectively as an external provider when order volumes swing up or down.

Key benefits of in-house fulfillment:

• Complete control: You manage every aspect of the fulfillment process, from inventory storage to shipping, enabling customization, and close quality control. 
• Personalized packaging: The ability to create unique packaging experiences for customers with brand-specific touches. 
• Quality control: Direct monitoring of product handling and packaging standards. 
• Special product handling: Ability to manage products that require specific care or attention. 

Benefits of a 3PL

Outsourcing order fulfillment to a 3PL is a smart move. Fulfillment isn’t simple. It involves managing inventory, efficiently and quickly picking, packing and shipping orders, and successfully negotiating carrier shipping rates. That’s why outsourced fulfillment services are often a game-changer, offering custom fixes for these tricky areas.

With the right 3PL partner, outsourced fulfillment provides many benefits:

• Save Time and Money: Streamline operations and cut costs.
• Tap Into Technology: Benefit from automation, robotics, and advanced reporting tools.
• Scale with Ease: A 3PL can flex with your growth and seasonal spikes.
• Focus on What Matters: Free up resources for product development and marketing.

If outsourcing sounds appealing, the next step is understanding how 3PLs structure their pricing.

3PL Models Explained

Not all 3PLs price their services the same way. Here are the three main models you’ll encounter:

Variable Warehouse Pricing

In this model, virtually all of the warehousing costs are variable. Storage is billed for what physically exists in the facility. Services are billed only for what is performed. There are no minimums to meet. As the customer, you have complete flexibility and are not making commitments.

 However, the downside of this model is that the risk shifts to the 3PL, and so the rates charged are typically higher. And since the 3PL has no guarantees of revenue from you, they will be tempted to sell their capacity (both space and throughput) to the next willing customer, which may result in limitations for your business.  

 Fixed Variable Warehouse Pricing

In this model, businesses have some fixed costs, but most of the costs are still variable. For example, the customer may be committing to a certain amount of space with the 3PL, which reserves that space to ensure that it will be there when needed. Additionally, there may be minimums to protect the 3PL and allow them to staff to meet your forecasted demand and cover a portion of this overhead even if volumes fall short.  

This pricing structure increases the collaboration between your company and your 3PL, making your 3PL a true supply chain partner. It also provides a consistent and predictable month-to-month cost.

Cost-Plus Warehouse Pricing

This warehouse pricing model is often a cost-effective option for business. In a Cost-Plus pricing structure, fulfillment providers typically apply the lowest margin percentage. This model provides full transparency into all expenses, allowing businesses to identify opportunities for improvement while fostering open discussions about the 3PL’s fulfillment costs.

One key advantage of cost-plus pricing is the immediate financial impact of continuous improvements, as well as the flexibility it offers the 3PL in responding to requests, market shifts, and business expansions. However, the Cost-Plus model can also lead to unforeseen expenses when quick decisions or market fluctuations arise. It requires tighter oversight and more time for invoice reviews, which may delay cost reductions. Despite these challenges, the cost-plus model promotes a stronger, more collaborative partnership between your business and your fulfillment providers.  In most cases, this model is deployed in facilities that are dedicated to a single client, or when the scope of service is very large. This model is difficult to deploy in shared facilities where a 3PL is servicing many customers with the same labor pool.

Revenue Share

The Revenue Share model is straightforward but requires just as much effort and analysis as the others. Under this structure, the 3PL charges customers a percentage of their total sales. Businesses may favor Revenue Share because it provides a predictable cost for warehouse operations relative to sales. However, 3PLs are generally reluctant to adopt this model, as it does not allow revenue to adjust in response to operational shifts.

A clear example of this challenge emerged in 2020 when retail volume shifted heavily to direct-to-consumer sales. Previously, revenue sharing worked well for bulk shipments - where full cases and pallets were sent to retail distribution centers.

But when that same volume transitioned to individual unit shipments, the workload increased significantly. Each unit required separate packing and shipping to the end consumer, yet the revenue increase was often marginal. This imbalance led to financial strain for 3PLs due to rising operational costs. Additionally, this model demands extensive forecasting and ongoing analysis to maintain accuracy and sustainability.

Standard Fulfillment Costs

No matter the pricing model, certain costs are universal:

• Onboarding: A one-time fee to set up your account, integrate and formalize the processes that will be used. For larger scopes, this will also include hiring and training of new personnel.
• Inventory Receiving: Labor associated with the unloading, identification, and put away of your goods to storage, often charged per unit or pallet.
• Storage: Monthly fees for housing your inventory, typically billed by the pallet, square foot, or cubic foot.
• Pick and Pack: Costs tied to fulfilling each order.
• Kitting: Fees for assembling or prepping products, especially common assortments that require a certain presentation value.
• Packaging and Supplies: These include boxes, dunnage, pallets, etc.
• Shipping: The big one - 3PLs leverage volume discounts with carriers to save you money.

 Factors effecting Pricing

Third-party logistics pricing is influenced by a variety of factors, depending on the services provided, the complexity of the supply chain, and market conditions. Here are the key elements that typically affect 3PL pricing:

1. Volume and Frequency of Shipments: The amount of goods you’re moving and how often you ship them play a big role. Higher volumes or regular shipments might lead to economies of scale, potentially lowering costs per unit, while sporadic or low-volume shipments could increase rates due to less predictability.
2. Type of Goods: The nature of the products being handled matters. Perishable items, hazardous materials, or oversized goods often require special handling, equipment, or compliance measures, which can drive up costs.
3. Storage and Warehousing Needs: If you’re using a 3PL for warehousing, factors like space requirements, storage duration, and additional services (e.g., climate control, inventory management, or pick-and-pack) will impact the price. Peak seasons might also bump up rates due to demand.
4. Service Level: If you require value-added services like kitting, assembly, or custom packaging, you will see additional costs. The more tailored, hands-on, or urgent the service (e.g., same-day delivery), the higher the cost.
5. Geographic Scope: Local, regional, or international logistics come with different price tags. Cross-border shipping involves customs, duties, and longer transit times, all of which add to the expense. One way to control geographic scope costs is to look for a 3PL with multiple locations.
6. Market Conditions: Fuel prices, labor shortages, or capacity constraints can push rates up. Economic trends or disruptions like a port backlog or a spike in demand also play a part.
7. Technology and Integration: If the 3PL provides software for tracking, analytics, or integration with your systems, that can increase costs. More sophisticated tech often means higher fees but might save money long-term through efficiency.
8. Contract Terms: Pricing can vary based on whether it’s a one-off service or a long-term partnership. Longer commitments might secure better rates, while spot pricing fluctuates with the market.
9. Labor Costs: Handling, packing, or managing inventory requires people. In areas with higher wages or during times of labor scarcity, this can nudge prices upward.

Each 3PL provider might weigh these factors differently, so it often comes down to their operational focus and your specific needs.

 a2b Fulfillment’s Pricing

Our pricing is as unique as your company. We construct customized, professional fulfillment solutions that fit your specific needs and goals. We use a variety of factors to create the best pricing option for you.

• SKU count
• Order volume
• Average order weight
• Storage needs
• Value-added services required

a2b is unique among 3PLs, as we are equipped to handle high-touch, customized fulfillment services at high volumes. We are able to do this through our technology and automation – everything from robotics to a robust WMS. Our facilities are designed to process both DTC and B2B orders quickly and efficiently.

We typically deploy a Fixed Variable pricing model that is skewed more to the variable side.

‍Why Choose a2b?

If you are interested in cost-savings, in-house fulfillment may not be right for you. Managing the end-to-end order process is expensive. It requires huge capital investments in labor, warehouses, IT infrastructure, and technology and automation.

More often than naught, 3PL’s shipping rates are significantly lower than rates you can negotiate. Since shipping costs are significant, outsourcing to a 3PL provides many advantages.

For nearly 25 years, a2b has stood out as a top 3PL. Here’s why:

• Top-Notch Customer Service:  With an assigned Client Success Manager watching over your account, we’re here for you, every step of the way.
• Competitive Pricing: Customized to fit your business, not a generic rate card. Only pay for what you need.
• Cutting-Edge Tech: Heavy investments in automation, robotics, and AI-driven insights.
• “Right-size” packaging: Custom packaging tailored to minimize waste and reduce shipping costs.
• People-First Mindset: We don’t just see boxes - we see the people behind every order.

At a2b, we know each package represents your brand and your promise to your customers. As your operational partner, we go beyond processing orders - we deliver on your reputation. Let us help you save time, cut costs, and grow smarter. Ready to explore what a2b can do for you? Let’s talk!

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