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

In today’s complex supply chains, third-party logistics (3PL) services play a critical role – over 90% of Fortune 500 companies utilise third-party logistics companies. Whether you run a small ecommerce store or a larger enterprise, 3PL providers offer the expertise and infrastructure to streamline your operations. A 3PL can handle everything from storage and inventory management right up to distribution, allowing you to focus on what you do best.

However, it’s important to understand the costs of 3PL services before making the leap. Pricing structures can vary widely depending on the services you need and the scale of your operations. For many businesses, 3PL costs can be confusing and difficult to predict.

That’s why it’s essential to grasp how 3PL pricing works up front. Knowing what to expect helps you budget effectively and avoid unexpected expenses. In this guide, we’ll break down the different pricing models and fees associated with 3PL services. By the end, you’ll have a clear understanding of how to manage these costs and make informed decisions for your business.

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. Understanding these fees upfront allows you to better manage your logistics budget and avoid surprises down the road.

In this section, we’ll explore the most common 3PL fees you’re likely to encounter. We’ll break down what each fee typically covers and explain how they can affect your total cost of using a 3PL provider. 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’ll 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.

International shipping is usually more complex and expensive. Costs are influenced by the destination country, with shipments to nearby European countries typically costing less than those sent further afield. For instance, shipping a small package to Europe might cost £20 to £30, while sending the same package to the United States or Asia could range from £30 to £60 or more. Additional factors, such as customs duties and taxes, can further increase these costs.

The type of freight – whether it's ground, air, or sea – also plays a crucial role in determining shipping costs. Ground freight is often the most economical option for domestic shipments, especially for bulky or heavy items. Air freight, while faster, is considerably more expensive and is generally used for time-sensitive or high-value items. Sea freight is the most cost-effective option for large international shipments, though it comes with longer transit times.

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 ecommerce.

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.

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.

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.

Activity-based pricing models, while flexible, are particularly prone to these additional charges. As each activity is billed separately, it’s easy for costs to accumulate in ways that aren’t immediately apparent. For instance, you might incur extra fees for after-hours processing, handling hazardous materials, or even for basic services like printing shipping labels. This complexity can make it difficult to predict your total expenses, leaving you with unexpected bills at the end of the month.

In contrast, our own per-order pricing model is designed to avoid these pitfalls. We believe that clarity and predictability are key to a successful partnership, which is why we offer a straightforward pricing structure without hidden fees. With per-order pricing, you know exactly what you’re paying for each order processed, making it easier to manage your logistics budget and avoid nasty surprises.

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.

How to Negotiate 3PL Contracts

A well-negotiated contract can help you secure better rates, more favourable terms, and added flexibility, all of which can contribute to a more efficient and cost-effective supply chain.

However, navigating these negotiations can be challenging, especially if you’re not familiar with the various pricing models and potential pitfalls. It’s important to approach the negotiation process with a clear understanding of your needs, an awareness of industry standards, and a strategy for how to achieve the best possible terms.

In this section, we’ll provide some practical tips on how to effectively negotiate 3PL contracts, ensuring that you get the most value out of your logistics partnership.

Assess Your Needs

Before entering into negotiations with a 3PL provider, it's essential to have a clear understanding of your specific logistics needs. Knowing exactly what you require from a 3PL partner allows you to approach the negotiation process with confidence and ensures that you focus on securing the services that are most critical to your business.

Start by identifying the core logistics functions you need help with – whether it's warehousing, transportation, order fulfilment, or specialised services like kitting or returns management. Consider your current order volume, seasonal fluctuations, and any unique requirements related to your products, such as temperature control or custom packaging.

Being clear about your needs also means understanding your budget constraints and how much flexibility you require in a contract. Are you looking for a long-term partnership with stable, predictable costs, or do you need a more flexible arrangement that can adapt to changing business conditions? By assessing these factors upfront, you can enter negotiations with a clear vision of what you need, making it easier to focus discussions on the most important terms and conditions.

Clear objectives not only helps you avoid agreeing to unnecessary services but also strengthens your position when it comes to finding pricing and contract terms that are aligned with your business goals.

Investigate Fee Structures

As we’ve covered throughout this article, understanding and comparing fee structures is a critical step in negotiating a 3PL contract. Different providers use various pricing models, and interpreting these correctly can make a significant difference in your overall logistics costs. Take the time to thoroughly investigate and compare these structures to make an informed decision.

Start by asking potential 3PL providers for detailed breakdowns of their pricing models. Whether they offer flat-rate, activity-based, or per-order pricing, ensure you understand exactly what each fee covers. Look for any potential hidden costs, such as minimum order requirements, surcharges for peak seasons, or additional fees for specialised services. Don’t hesitate to ask for clarity on any charges that seem vague or complicated.

Leverage Volume for Discounts

One of the most effective strategies in negotiating 3PL contracts is to leverage your shipping volume to secure better rates. Many 3PL providers offer discounts for businesses that can commit to higher volumes, as this ensures consistent work for them and reduces their operational risks.

To take advantage of this, first, assess your current and projected shipping volumes. If you can demonstrate consistent or growing volumes, use this as a bargaining chip during negotiations. Providers are often willing to offer tiered discounts or more favourable pricing if they know they can count on a steady flow of business from you.

Additionally, consider bundling services across different aspects of your logistics needs. For example, if you require both warehousing and transportation, negotiating a combined service agreement can often lead to further discounts. The more services you can commit to with a single provider, the more leverage you have to negotiate lower rates.

Finally, if your business has seasonal spikes, discuss ways to spread your volume more evenly throughout the year or negotiate special rates for peak times.

By strategically using your volume as leverage, you can significantly reduce your overall logistics costs while clearly indicating your intention to develop a long-term partnership with your 3PL provider.

Review and Renegotiate Contracts

We recommend regularly reviewing your 3PL contract to ensure that your logistics costs and services remain aligned with your business needs. As your business evolves, so too should your logistics partnership.

Start by scheduling periodic contract reviews, perhaps every 12 months. During these reviews, assess whether your current contract still meets your needs in terms of pricing, service levels, and overall value. Pay close attention to any changes in your order volume, new service requirements, or shifts in market conditions that might justify renegotiation.

When approaching renegotiations, come prepared to demonstrate the value you intend to share with your 3PL partner. A strong partnership fosters mutual growth and success. If you can demonstrate clear growth and consistent volume, it may give you the leverage you need to secure better rates or more favourable terms. Additionally, stay informed about industry trends and pricing benchmarks, so you know what’s reasonable to request.

Wrapping Up

In conclusion, navigating the complex world of 3PL pricing and contracts requires a clear understanding of the various cost structures and additional factors that can impact your logistics expenses.

Here are our key takeaways:

• Understand common fees: Be aware of the various fees associated with 3PL services, including onboarding, receiving inventory, storage, pick and pack, shipping, and reverse logistics. These fees can significantly impact your overall logistics costs.
• Evaluate pricing models: Different pricing models – such as flat-rate, activity-based, per-unit, and tiered pricing – offer different benefits depending on your business's size, order volume, and growth trajectory. Choosing the right model is crucial for aligning your logistics costs with your revenue.
• Factor in additional costs: Seasonal variations, value-added services, and hidden fees can all influence your total logistics expenses. It’s important to factor these into your budgeting and planning to avoid unexpected costs.
• Negotiate effectively: Leverage your shipping volume, assess your needs clearly, and regularly review and renegotiate contracts to ensure you’re getting the best possible deal from your 3PL provider.

But, most important of all…

Opt for Transparent Pricing from a 3PL You Can Trust

Understanding 3PL costs is the first step to making an informed decision for your business. But, what if you could avoid the headaches of unpredictable expenses and complex pricing structures?

At Tap’in, we believe in clarity and simplicity. That’s why we offer a straightforward, all-inclusive pricing model – one simple price per box delivered, with no hidden fees.

You only pay when you make money, keeping your cash flow healthy and predictable. No surprise charges, no complicated invoices – just transparent pricing that aligns with your business growth.

Ready to take control of your logistics without straining your budget? Let’s make it happen – get in touch with us today!