Fulfillment costs in Canada: what a 3PL really charges

How 3PL pricing works

Most 3PLs charge by activity: every task performed in the warehouse has a rate. Fees usually fall into three groups:

• One-time fees: receiving a pallet or a container, setting up the integration, special projects.
• Recurring fees: monthly warehouse storage fees, per pallet, per shelf location or per square foot.
• Per-order fees: picking, packing, packaging and shipping labels, then the shipping itself.

Some providers bundle several of these into a flat fee per order. That is easier to read, but check what is included: packaging materials, additional items and returns are often billed separately. Others set a monthly minimum or charge an account management fee. The only fair way to compare two offers is to run both against your own volumes.

Receiving: the cost of getting stock in the door

Receiving covers unloading the truck, counting, checking quantities against your purchase order, identifying products and putting them away in the system. It is billed per pallet (generally $30 to $45) or per container.

A 20- or 40-foot container with floor-loaded boxes takes far more labor than a palletized delivery: every box has to be unloaded by hand, then palletized. Hence the ranges of $350 to $550 for a 20-footer and $550 to $850 for a 40-footer.

What drives the bill up: deliveries without an advance shipping notice, pallets mixing several SKUs, boxes without barcodes, or quantities that do not match the paperwork. Preparing your inbound shipments properly is the easiest saving you can make. See how receiving works at Kolineo.

Warehousing costs: per pallet, per shelf or per square foot

Storage is the recurring line on your invoice. Three billing methods are common:

• Per pallet: $18 to $28 per pallet per month. This is the norm for products sold by the case or in volume. A standard North American pallet measures 48 × 40 inches, or about 13.3 square feet of floor space.
• Per shelf location: $6 to $12 per month. Ideal for small items, large catalogs or products sold by the unit.
• Per square foot or cubic foot: mostly used for space dedicated to a single client, such as a reserved project area or large, stable volumes. The price then depends on the local industrial real estate market and the services included.

The right method depends on your products. Paying for a full pallet to hold 30 units that would fit on a shelf is money wasted. Also ask whether the 3PL charges long-term storage fees on inventory that sits for months; it is common in the industry. Kolineo offers several types of warehousing so the space matches your products.

Pick and pack: per order and per item

Pick and pack is the heart of fulfillment costs. For ecommerce, most 3PLs charge a rate for the order and its first item, $2.75 to $3.75, then an amount for each additional item, $0.50 to $0.85. A three-item order costs more to fulfill than a single-item order, but much less than three separate orders.

Retail orders follow a different logic. They often involve several cartons, compliance labels and sometimes a full pallet, so they are billed per order ($12 to $20) and per carton ($1.25 to $2.00). Learn more on our order picking page.

Packaging: a small fee that shapes your shipping bill

Packaging materials (box, padded mailer, void fill, tape) usually cost $0.40 to $1.20 per order, depending on size and type. If you supply your own branded boxes, this line goes down, but you will pay to store them.

Packaging matters mostly because of its effect on shipping. Carriers bill the greater of actual weight and dimensional weight, which is calculated from the size of the box. A box that is too big for its contents can raise the cost of a shipment far more than the box itself costs.

Returns and value-added services

Every return has to be received, inspected, then restocked, set aside or disposed of according to your instructions. Expect $3.50 to $5.50 per returned unit. For an apparel brand with frequent returns, this line can be significant; for consumables, it stays small.

Value-added services are billed per unit. Kitting (assembling a gift set or a bundle) generally runs $0.75 to $2.50 per unit, and labeling (barcodes, compliance labels, price stickers) $0.20 to $0.45 per unit.

Shipping: the most variable cost

Shipping is not included in the ranges above, for good reason: its price depends on weight, dimensions, destination, service level and carrier, plus surcharges such as fuel, residential delivery or remote areas. For many online stores, it is the largest line of the logistics budget.

It is also where a 3PL often makes the biggest difference. Thanks to the pooled volume of its clients, Kolineo has negotiated rates with Canada Post, Purolator, UPS, FedEx, Nationex and other carriers, and its clients save 28% on shipping on average. For retail shipments, we also compare less-than-truckload (LTL) and full truckload (FTL) options. See our shipping services.

Worked example: an online store shipping 800 orders a month

Take an online store that ships 800 orders a month, with an average of 1.5 items per order. It keeps 25 pallets in storage, receives 10 pallets a month and sees 3% of its orders come back.

That puts fulfillment costs at $4.44 to $6.98 per order, before shipping and taxes. Where you land in that range depends mostly on product size, the quality of the data you send and how complex your packaging is. Shipping is then added on top, parcel by parcel.

To run the numbers with your own volumes, our 3PL cost calculator applies exactly this method in about a minute.

Fees to check in any 3PL quote

Two quotes showing the same price per order can lead to very different invoices. Before you compare, ask these questions:

• Is there an account setup or integration fee?
• Is there a monthly minimum?
• Are packaging materials included in the pick and pack rate?
• How is slow-moving or long-term inventory billed?
• Are physical inventory counts billed?
• What do special projects, relabeling or sorting cost?
• Are there fees to pull your inventory out if you change providers?
• Are shipping rates passed through at cost or with a markup?

A serious provider answers each of these clearly and puts the answers in the contract.

5 ways to lower your fulfillment costs

1. Prepare your inbound shipments. Advance shipping notices, one SKU per pallet where possible and barcodes on every box lower receiving fees and the risk of errors.
2. Pick the right storage method. Move slow movers from pallets to shelves and clear out dead stock.
3. Right-size your packaging. A few well-chosen box sizes reduce dimensional weight, and therefore shipping costs.
4. Encourage multi-item orders. A free shipping threshold or bundles raise the average order without multiplying pick and pack fees.
5. Prevent returns at the source. Accurate product pages (dimensions, sizing, photos) avoid many returns, along with the return and shipping fees that come with them.