How to Calculate Warehouse Storage Costs

Calculating warehouse storage costs can be a daunting task. However, adequately calculating these storage costs contributes immensely to your financial planning.

In addition, it means you’ll be able to run your company’s logistics smoothly. As a result, you can take stock inventory quickly and account for any losses efficiently.

In this article, we’ll delve into how to calculate warehouse storage costs and highlight the factors that affect them. You’ll see that acquiring the storage cost will help you efficiently determine your company’s net profit.

Factors to Consider when Calculating Warehouse Storage

Before you jump in and start calculating your warehouse storage expenses, consider certain factors. These factors will determine the outcome of your warehouse storage calculation.

Location

Location is one of the most important factors when considering warehouse storage costs. For example, proximity to your target market can affect your storage cost. The closer your warehouse is to your market site, the less you’ll spend transporting your goods.

However, it can cost you more to access vital areas of commerce. For example, having your warehouse closer to an airport or rail line costs you more for access. However, such proximity will save you money in the long run on logistics.

Inventory Mobility

A rolling stone gathers no moss, and so does an active warehouse with moving goods. Therefore, your estimated warehouse costs can rise if you have stagnant goods in your warehouse for prolonged periods. The longer an item stays in the warehouse, the higher the cost per unit will be.

Therefore, ensuring your stock keeps moving in and out of the warehouse is essential. In addition, the mobility of your stock will reduce storage costs.

Storage Space

Your warehouse operating costs will increase with the need for more storage space. Generally, the warehouse cost per pallet can rise significantly depending on the space it covers. However, you can invest in storage systems that’ll hoard more stock without the problems of additional costs.

These storage systems include pallet racking for safety, stairway access or shelving options for heavy-duty items. Furthermore, you can include conveyor systems to increase operational efficiency.

Adequate Conditions

Above all, the environmental condition within the warehouse needs to be optimized so your products can thrive. For instance, ensure the warehouse has adequate lighting and air conditioning.

Find out how often you can visit the warehouse to inspect product conditions. Thankfully, numerous warehouse solution providers in Ontario allow regular visits. Hence, we recommend partnering with a warehousing partner offering periodic inspections and access to your goods.

storage space

How to Calculate Warehouse Storage Cost

Ideally, the basic formula for warehouse storage cost is the rental rate per square foot multiplied by the square footage you desire. However, this formula may seem like an oversimplification. So let’s go deeper into the calculation of storage cost.

Warehouse spaces exist as storage spaces that you can rent monthly or yearly. However, before renting out an area, you need to find how much square footage you need.

Here’s how to measure your square footage to estimate your warehouse costs.

Arrange your Stock by their Sides

Save space by stacking your inventory close to each other while arranging your stock. Next, take out a measuring tape and measure the stack’s length, width and height.

It’s possible for your inventory to not fit in one space. But, no worries, you can stack them in different spaces and combine the dimensions for both stacks.

You want to minimize as much space as possible because warehouse pricing per square foot can multiply exponentially. Therefore, the more ground you cover horizontally, the more you’ll pay.

Related Article: All About LTL Shipping in Canada

arrange your stock

Determine the Square Footage of your Inventory

The next step is to multiply the length of your stack by its width. This multiplication will determine warehouse storage costs.

Determine the Cubic Feet of Storage Required

Is the warehouse you want to use charging by cubic feet? You can get ahead of this by multiplying the square foot of the stack by the highest point.

Once you get your number, multiply it by the charge per cubic foot to determine your warehouse storage expenses. Then, you’re closer to identifying your overall storage costs.

Figure Out the Number of Storage Bays for your Inventory

Next, you’ll want to divide your total square footage by the storage bay’s size. For example, say your total square footage is 1000 square feet, with each individual storage bay measuring 500 square feet. Consequently, you’ll need two areas for your inventory.

So if you’re getting any warehouse storage in Ontario, these calculations will save you costs ahead of time. Once you’re done calculating, you can ask for a quote from the target warehouse.

Accounting for Operational Cost when Renting Warehouse Storage

As you know now, warehouse pricing is per square foot. However, you should also take note of operating costs. It’s not enough to rent the space; you must know the cost of storing your inventory.

Firstly, electricity is necessary for powering the warehouse and will factor into your expenses. Next, you may have to pay for water fees if storage conditions rely on the availability of running water.

The warehouse needs to be kept clean often, so you’ll need the services of a janitor. Now, the warehouse may provide a cleaner, or you could hire yours.

Air conditioning is vital in warehouse storage to preserve your items. Hence, you’ll need the services of an HVAC technician, which can either be provided by the warehouse or by yourself.

Related Article: How to Ship LTL Freight

renting warehouse storage

In the End

Warehouse storage costs don’t have to be as complex as before. You can adequately estimate the cost of storing your inventory from the start. Hence, you’ll be able to scale your business with this knowledge quickly.

If you have any further questions on warehouse storage and its cost, you can send us an email or give us a call. In addition, you can check out our warehouse storage services and ask for a quote today. RoadLINX is here to service all your warehouse storage needs!

Get a quote today!



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