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 and benefits and necessary equipment, and divided that amount by the number of hours available once vacations, breaks, holidays and fatigue 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, pulling 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 (or cubic) 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.
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, order (or bill of lading) charge, taking pictures, handling damage claims with carriers.
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 – This is the most misunderstood of all insurance. WLL covers losses to your product due to the negligence of the 3PL. Lawyers have become rich trying to determine fault in these cases, but basically you have to prove that the 3PL did not act as a “reasonable man” would have acted in like circumstances, and that those actions resulted in the loss of your product.
*** Many warehouses limit the amount of damages that can be claimed. This is usually stated as an amount per pallet or case (typically between 100 and 500). 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.
Are you a Bonded Warehouse?
Most of the time, what the inquirer wants to know is if their product is insured. Bonding in its most common usage refers to a tax or duty owed to a governmental agency typically on imported goods, alcohol or tobacco products. If you need this type of bonding, be sure to communicate that to the 3PL.