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How 3PL's Determine their Rates:

Posted on Tue, Jan 18, 2011 @ 10:31 AM

Chicago Public WarehouseNeill Cartage and Warehouse is Chicago's premier full service logistics, warehousing, and distribution company.  Servicing the Midwest since 1946. 


What information will the 3PL need to give me a quote?

The more information you can give the 3PL, the more accurate your quote will be.  Here is a list of what you will need:

  • A general description of what you want the 3PL to do and what your goal is in outsourcing. 
  • A description of your product: sizes, weights, special handling and storage requirements.
  • How the product will come in:  palletized, floor-loaded, truckload, LTL, rail, intermodal, small package.
  • Number of stock keeping units - SKU’s.
  • How the product will go out:  truckload, LTL, rail, containers, small package, customer pickup.
  • Number of inventory turns.
  • Projected volume


How are my rates determined?

3PL’s have two things to sell: labor / handling and space / storage.  

The 3PL begins by developing a labor rate made up of all of its labor-related costs: hourly wages, benefits, necessary equipment, and than divides that amount by the number of hours available vacations, breaks, and holidays are subtracted.  This gives the 3PL an hourly rate they need to charge to cover their costs.  A profit amount is added to this rate.

The rate is then multipled by the amount of time needed to perform the necessary tasks: unloading freight, picking orders, preparing documents, etc.  Some 3PL’s use engineered standards and some use standards developed from years of experience. 

This rate is determined by the amount of square footage your product will occupy in the warehouse and for how long it occupy that space.  That is multiplied by a rate per square foot that the 3PL has calculated.   Typical rate methods include per pallet, per case, per hundredweight, per ton or a “per square foot” rate based on monthly occupied space.

Assessorial charges
Most 3PL’s have a list of charges that cover services provided that are not included in the storage and handling rate.  These might include stretch-wrapping, labeling, restacking, creating packing lists, bill of lading charge, taking pictures, handling damage claims with carriers.

Minimum charges
3PL’s typically charge a minimum for such items as inbound storage and handling and monthly recurring storage.


Are my goods Insured?

This is the most common question users of 3PL’s have.  The typical 3PL carries several types of insurance:

  • Workers compensation: make sure the policy is up to date.  It is conceivable that you could be held liable for injuries sustained by others who are involved in handling your goods.
  • General liability
  • Cargo insurance: make sure it is sufficient to cover the value of your goods transported by the 3PL truck.
  • Warehouse Legal Liability Insurance

Many warehouses limit the amount of damages that can be claimed.  This is usually stated as an amount per pallet or case.   Be sure you clarify with the 3PL the value of your product to insure adequate coverage.  It is also advisable to contact your insurance agent to determine if your goods adequately covered in an outside facility.


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Tags: Third-Party Logistics, 3PL Rates