How Much Does a 3PL Cost? 3PL Pricing Models & Fees

In today’s complex supply chains, third-party logistics (3PL) services play a critical role – in fact, over 90% of Fortune 500 companies utilise third-party logistics companies. Whether you run a small e-commerce store or a larger enterprise, a 3PL can handle everything from storage and inventory management right up to distribution, allowing you to focus on your brand's production and marketing.

However, it’s important to understand the costs of 3PL services before making the leap. Pricing structures can vary widely depending on what third-party logistics company you partner with, the services your business requires and the scale of your operations.

Before we dive into the factors that influence 3PL costs, it’s important to highlight that Tap'in operates a price-per-delivered litre (PDL) model. This approach includes allowances and estimates for handling, storage and delivery, making it easier for customers to understand pricing and minimises invoicing and paperwork.

To further understand how much your business could save annually when partnering with Tap'in, check out our PDL tool which compares our prices with your in-house fleet management.

In this article, we’ll take a look at all the different fees that 3PLs charge, helping you make the best choice for your drinks business.

What are the Common 3PL Fees?

When working with a third-party logistics provider, it’s important to be aware of the common fees that can impact your overall costs. These fees cover a wide range of services, from basic storage and handling to more specialised functions like kitting and returns processing.

In this section, we’ll explore the most common 3PL fees you’re likely to encounter. This knowledge will help you make informed decisions as you evaluate potential logistics partners.

Onboarding and Setup Fee

The onboarding and setup fee is one of the first costs you may encounter when partnering with a 3PL provider. This fee covers the initial expenses involved in integrating your business with the 3PL’s systems and processes. It’s a one-time charge that ensures everything is set up correctly from the start, paving the way for smooth and efficient operations moving forward.

Typically, this fee includes a range of activities, such as setting up your account, configuring the necessary technology and training your team on how to use the 3PL’s systems. It might also cover the initial intake and organisation of your inventory within the 3PL’s warehouse. This step is crucial as it ensures your products are properly labelled, categorised, and ready for efficient handling and distribution.

In some cases, the onboarding process may also involve custom integrations with your existing systems, such as e-commerce platforms or inventory management software. While the setup fee might seem like a significant upfront cost, it’s an investment in ensuring that your partnership with the 3PL provider starts on the right foot. Proper onboarding minimises disruptions and sets the stage for a seamless and productive relationship.

Receiving Inventory

Receiving inventory is a crucial part of the logistics process and most 3PL providers will charge a fee for this service. This fee covers the costs associated with unloading your products when they arrive at the warehouse, inspecting them for accuracy and damage and then stocking them in the appropriate storage location.

Typically, these fees are calculated based on the volume or number of units received. For example, you might be charged per pallet, per carton or even per item, depending on the provider’s pricing model. In the UK, the average cost for receiving inventory can range from £10 to £30 per pallet, or around £0.25 to £0.50 per individual item, depending on the complexity of the products and the level of inspection required.

The receiving fee also accounts for the time and labour involved in this process. Some 3PL providers may include additional charges if your inventory requires special handling, such as products that need to be inspected for quality or compliance with specific standards. Understanding how these fees are calculated helps you anticipate the costs associated with bringing your inventory into the 3PL’s system and allows you to budget accordingly.

Storage

Storage fees are a key component of 3PL costs and they can vary widely depending on how your products are stored and the amount of space they require. Most 3PL providers offer different types of storage, each with its own pricing model, allowing you to choose the option that best fits your needs.

Common types of storage fees include charges based on pallet space, shelf space or square footage. For pallet storage, you’re typically charged a monthly fee per pallet, which in the UK can range from £5 to £15 per pallet per month. Shelf space is often used for smaller items and might be charged per bin or per shelf, with costs ranging from £1 to £5 per bin per month. If your products require a large area, storage fees might be calculated by square footage, with rates varying depending on the facility and location.

Several factors can influence your storage costs. The volume of goods you store is the most obvious factor – larger quantities will naturally require more space and therefore incur higher fees. The weight of your products can also affect costs, especially if heavy items require reinforced shelving or special handling. Additionally, storage conditions play a significant role; for example, temperature-controlled or humidity-controlled environments needed for sensitive goods, like food or pharmaceuticals, will come at a premium, often increasing the storage fee by 20% to 50%.

Understanding these storage options and the factors that influence costs can help you select the most cost-effective solution for your business while ensuring that your products are stored in optimal conditions.

Pick and Pack Fees

Pick and pack fees are charged for the service of retrieving items from storage and preparing them for shipment. These fees cover the labour and resources involved in locating the items in the warehouse, packing them securely, and getting them ready for delivery to your customers.

The cost of pick-and-pack services is typically calculated on a per-order or per-item basis. In the UK, you might expect to pay anywhere from £0.50 to £2.00 per item picked, depending on the complexity of the order. Some 3PL providers also charge a base fee per order, which can range from £1 to £3, on top of the per-item fee. This means that the more items in an order, the higher the pick and pack costs will be.

Order volume and complexity significantly impact pick and pack fees. High-volume businesses may benefit from lower per-item costs due to economies of scale, but complex orders – such as those requiring multiple items to be picked from different locations within the warehouse or special packaging – can drive up costs. For example, if an order requires custom packaging or the inclusion of promotional materials, additional fees may apply.

Pick and pack fees are some of the most common across the industry, as well as the fees that can really bring up your total costs, so it’s worth spending some time to understand how these are charged by any prospective partner. With a firm grasp of how these fees are structured, you can better anticipate your expenses and explore ways to optimise your order fulfilment process.

Shipping and Transportation

Shipping and transportation fees are a significant part of your overall 3PL costs, covering the movement of goods from the warehouse to your customers, whether domestically or internationally. These fees can vary widely based on several factors, including the destination, delivery speed, and the type of freight used.

For domestic shipping within the UK, fees are typically calculated based on the size and weight of the shipment, as well as the distance it needs to travel. Standard delivery options might range from £5 to £15 per package for smaller items, while larger shipments could cost significantly more. Express or next-day delivery services generally come at a premium, sometimes doubling or tripling the standard shipping rate.

The distance your goods need to travel and the speed at which they must be delivered directly affect pricing. Shorter distances and slower delivery options will typically be cheaper, while urgent deliveries over long distances will incur higher fees. By understanding these variables, you can better manage your shipping and transportation costs, ensuring that your logistics expenses align with your business’s needs and budget.

Reverse Logistics

Reverse logistics refers to the process of managing returned products and it is an essential, albeit often overlooked, part of the supply chain. The costs associated with reverse logistics can add up quickly, including fees for restocking, inspection, repackaging, and even disposal of unsellable items.

Restocking fees are typically charged per item and can range from £1 to £5, depending on the complexity of the product and the condition in which it’s returned. If a returned item needs to be inspected for damage or repackaged before it can be restocked, additional costs may be incurred. For products that cannot be resold, disposal fees might apply, especially if the item needs to be handled as hazardous waste or recycled in a specific way.

Efficient reverse logistics is crucial for controlling overall costs. A streamlined process for handling returns can minimise the time and labour required, reducing the impact on your bottom line. Moreover, effective reverse logistics can enhance customer satisfaction by providing quick refunds or exchanges, which is increasingly important in competitive markets like e-commerce.

By optimising your reverse logistics, you can mitigate the costs associated with returns and even find opportunities to recover value from returned products, such as through refurbishment or resale. This not only helps to keep your logistics expenses in check but also contributes to a more sustainable and customer-friendly operation.

3PL Pricing Models

When partnering with a third-party logistics (3PL) provider, it’s important to understand that there isn’t a one-size-fits-all approach to pricing. Different 3PLs use a variety of pricing models, each designed to accommodate different types of businesses and logistics needs.

While we wouldn’t recommend selecting a 3PL purely based on its pricing model, an understanding of how they charge for their services can certainly help in making an informed decision.

In this section, we’ll explore a few common 3PL pricing models that you might encounter. With a basic understanding of the typical fee structures, you’ll be better prepared to evaluate how a potential 3PL partner’s pricing structure aligns with your business’s budget, operational requirements and long-term goals.

Interested in a 3PL pricing model that is scaleable and transparent? Check out our PDL tool- it uses our standard PDL rate to calculate how much you could save on drinks logistics when you partner with Tap'in.

Flat-Rate Pricing

Flat-rate pricing is one of the simplest pricing models offered by 3PL providers. Under this model, you pay a fixed, consistent fee for a set range of services, regardless of the volume or complexity of your orders. The fee typically covers basic logistics functions such as storage, picking, packing and shipping.

Flat-rate pricing is often used by businesses with predictable order volumes and relatively stable operations. For example, if your business handles a consistent number of orders each month without significant fluctuations, a flat-rate model can make budgeting easier and more predictable. It’s also a popular choice for smaller businesses that want to avoid the complexity of pricing models with many moving parts.

Flat-rate pricing is a good choice for businesses that value simplicity and need a reliable cost structure without the hassle of monitoring varying fees. However, it may not be the most cost-effective option if your order volume fluctuates, as you might end up paying the same rate during slower periods as you would during peak times.

Overall, flat-rate pricing offers a straightforward and transparent way to manage your 3PL costs, making it a good fit for businesses that prioritise simplicity and predictability in their logistics expenses.

Activity-Based Pricing

Activity-based pricing is a model where costs are directly tied to the specific services and tasks performed by the 3PL provider. Unlike flat-rate pricing, where you pay a consistent fee regardless of the work involved, activity-based pricing charges you for each individual activity carried out on your behalf. This means you only pay for what you use, making it a highly flexible and customizable option.

In this model, costs are typically assigned to a range of activities – all the fees we discussed in the previous section – such as receiving inventory, storing products, picking and packing orders, and shipping. Each of these activities is priced separately, allowing you to see exactly where your money is going. For example, you might be charged a fee for each pallet of goods received, a daily or monthly rate for storage, a per-item fee for picking and packing, and additional charges based on the shipping method you choose.

This pricing model is particularly beneficial for businesses with fluctuating order volumes or those that require a variety of services. If your needs vary month to month – say, with seasonal demand or special promotions – activity-based pricing ensures that you’re not paying for services you don’t use during slower periods. Instead, your costs scale directly with the level of activity, providing greater transparency and control over your logistics budget.

However, while activity-based pricing offers flexibility, it can also be more complex to manage. Keeping track of multiple fees for different activities requires careful oversight, and the overall cost can become unpredictable if your logistics needs change frequently. It’s essential to closely monitor your usage and understand how each activity impacts your total costs.

Overall, activity-based pricing is ideal for businesses that need flexibility and want to tailor their logistics services to specific needs, while maintaining clear visibility into the costs associated with each aspect of their 3PL partnership.

Pricing by Unit, Order, Pallet, etc.

Pricing by unit, order, pallet or some other consistent measure is a model that directly links your logistics costs to the volume of goods processed or orders fulfilled, making it a highly responsive and scalable option. Unlike flat-rate or activity-based pricing, this approach ensures that your expenses align closely with your business’s revenue and operational activity.

This pricing model is structured so that you pay based on the actual number of units, orders, or pallets handled by the 3PL provider. For example, you might incur a charge for each order processed, each unit stored or shipped, or each pallet managed in the warehouse. This model naturally adjusts to your business’s needs, making it particularly advantageous for companies experiencing growth, seasonal fluctuations, or varying order sizes.

One of the key benefits of this model is its alignment with your cash flow. Because your logistics costs increase only as your sales increase, you avoid the risk of paying for services you don’t need during slower periods. This makes budgeting more predictable and helps you manage your resources more effectively. For businesses focused on maintaining a healthy cash flow and scaling efficiently, this model offers a straightforward, yet flexible and responsive way to manage logistics costs.

Tiered Pricing

Tiered pricing is a model where the cost per unit or service decreases as the volume of goods or orders increases. This structure is designed to reward higher volumes with lower per-unit costs, making it an attractive option for businesses that experience significant growth or have large-scale logistics needs.

Under tiered pricing, a 3PL provider sets specific volume thresholds, and as your business crosses these thresholds, the rate you pay for each unit, order, or pallet decreases. For example, you might pay a higher rate for the first 1,000 units processed but receive a discounted rate as your volume increases beyond that point. This model encourages businesses to maximise their logistics volume to benefit from lower rates.

The primary advantage of tiered pricing is that it can lead to significant cost savings as your business scales. By achieving higher order volumes, you unlock more favourable pricing, which can be particularly beneficial for businesses with predictable or rapidly growing demand. This model also offers an incentive to streamline operations and increase efficiency to reach higher volume tiers.

However, it's important to carefully assess your business's ability to consistently reach these volume thresholds. If your volume fluctuates or remains below the higher tiers, you may not fully benefit from the potential cost savings. As a result, tiered pricing is best suited for businesses with a stable or growing volume of orders that can reliably take advantage of the discounts offered at higher tiers.

Hybrid Pricing Models

Hybrid pricing models combine elements from multiple pricing structures to create a tailored solution that meets the unique needs of a business. This approach allows 3PL providers to offer a flexible and customised pricing strategy that can adapt to the specific requirements and challenges of different clients.

For example, a hybrid model might blend flat-rate pricing for basic services like storage with activity-based fees for more variable tasks such as picking, packing or handling returns. Alternatively, a business might benefit from combining tiered pricing for high-volume products with per-order pricing for items that have more irregular demand. This flexibility ensures that you are only paying for the services you need, while still benefiting from predictable costs in certain areas.

The key advantage of hybrid pricing is its adaptability. It allows businesses to optimise their logistics costs by selecting the most cost-effective pricing model for each aspect of their operations. For businesses with complex or fluctuating logistics needs, a hybrid model can provide the best of both worlds: the stability of flat-rate or tiered pricing, combined with the flexibility of activity-based or per-unit pricing.

However, the complexity of hybrid pricing requires careful management and a clear understanding of how each component of the model impacts your overall costs. The additional work required from your 3PL provider might also mean higher costs overall, so it’s generally only worth negotiating complex contracts if you have especially varied logistics requirements.

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Additional Cost Considerations

While we’ve covered the primary pricing models and fees related to 3PL services, we haven’t captured the full picture of your potential logistics expenses. There are several additional factors that can significantly impact your overall costs.

These factors may vary depending on the nature of your business, the specific services you require, and how you choose to structure your 3PL partnership.

Here are some additional cost considerations that you should keep in mind.

Seasonal Variations

Seasonal variations can have a significant impact on 3PL costs, especially during peak periods like the holiday season or major sales events. During these times, demand for logistics services typically spikes, leading to increased costs for storage, picking, packing, and shipping. 3PL providers often adjust their pricing to account for the additional labour and resources needed to handle the higher volume of orders.

For example, you might see surcharges or higher rates for services during the months leading up to Christmas or during a major sales event like Black Friday. These adjustments are often temporary but can substantially increase your logistics expenses during peak periods.

Understanding how your 3PL provider handles seasonal variations can help you better prepare for these cost fluctuations. We strongly recommend planning ahead and factoring these potential increases into your budget, especially if you’re considering a new partnership in the quieter parts of the year.

Value-Added Services

Value-added services refer to additional offerings provided by 3PL companies that go beyond basic logistics functions. These can include services like kitting, assembly, specialised packaging, and custom labelling. While these services can enhance your product offerings and improve customer satisfaction, they also come with additional costs.

For example, kitting—where multiple items are bundled together into a single package—might be charged on a per-kit basis, while assembly services, such as putting together product components, could be billed hourly or per unit. Specialised packaging, such as custom boxes or protective materials, often incurs extra fees depending on the materials used and the complexity of the packaging requirements.

While these value-added services can be invaluable for differentiating your products and improving operational efficiency, it’s important to account for these additional costs in your overall logistics budget. By carefully selecting which value-added services you need, you can balance enhanced service offerings with cost considerations.

Long-Term Contracts vs. Pay-as-You-Go

When partnering with a 3PL provider, one important decision is whether to enter into a long-term contract or opt for a pay-as-you-go model. Each approach has distinct financial implications that can impact your business differently depending on your logistics needs and growth plans.

• ‍Long-term contracts: typically offer more predictable costs and may include discounted rates in exchange for your commitment over a set period, usually a year or more. This stability can be beneficial for businesses with steady demand and a clear understanding of their logistics needs. However, long-term contracts can also lock you into a specific pricing structure, which might not be ideal if your business experiences significant changes in order volume or service requirements.‍
• Pay-as-you-go models: provide greater flexibility, allowing you to adjust your logistics spending based on current needs. This can be particularly advantageous for businesses with fluctuating demand or those that are still growing and evolving. The downside is that this model can result in higher overall costs, or fluctuations during peak times or unexpected surges in orders, as there’s less opportunity for negotiated discounts.
  

Don’t assume that pay-as-you-go is the right answer – choose the right option depending on the stability of your operations and growth trajectory. If predictability and cost control are priorities, a long-term contract may be the better choice. However, if flexibility and adaptability are essential, a pay-as-you-go model might better suit your needs.

Hidden Fees

One of the challenges businesses often face when working with 3PL providers is the presence of hidden fees. These are unexpected charges that can significantly increase your logistics costs and disrupt your budget. Hidden fees can arise in various forms, such as administrative fees, fuel surcharges, minimum order fees, or even penalties for not meeting certain volume thresholds.

Whatever model you choose, make sure to pick a 3PL provider that clearly values transparency. You should carefully review any potential provider’s fee structure and ask detailed questions to uncover any hidden charges that might not be immediately obvious. Doing so will help you avoid unexpected costs and build a more predictable, cost-effective logistics partnership.

Tap'in: Transparent 3PL Pricing You Can Trust

At Tap’in, we believe in clarity and simplicity. That’s why we offer a straightforward and transparent Price per Deliverable Litre (PDL) pricing model that is scaleable and tailored to each business's individual drinks logistics needs.

Our PDL rate covers:

1. Receipt and handling of pallets into the warehouse
2. Storage (based on your individual needs)
3. Collection of empty kegs from venues
   

Check out our PDL tool to find out how much you can save with Tap'in.

If you're a drinks producer delivering 3,500 litres/340 kegs or more per month and ready to take control of your logistics? Get in touch today via the form below to discuss how our bespoke pricing model can work for your drinks business.

Want to find out more? Check out our Tap'in blogs:

1. Exploring the Benefits of 3PL Services
2. What is a 3PL? Understanding the Basics of Third-Party Logistics
3. 10 Signs It Might Be Time To Use a Third-Party Logistics Company for Your Drinks Business

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