Types of costs

Warehouse managers require a comprehensive knowledge of all costs and cost drivers within the warehouse as they are under significant pressure to reduce costs yet continue to produce optimum customer service with the added pressure of reducing inventory. For example, a pallet of laptops will take up the same amount of space and the same amount of handling as a pallet of baked beans, yet the value of goods will be significantly different. Managers are also expected to contribute data to the company budget and continually reassess the resource and cost budget in line with the actual operation.

Warehousing costs are levied by the warehouse owners and are an unavoidable expense for the companies that use the space. The owners should be conversant with the applicable charges. As the warehouses grow in number and provide more services, determining the cost of the company gets more difficult. There are generally three types of expenses involved and they should be understood, while calculating the costs.

The first is the General Overhead Cost. This consists of the cost of space per cubic square foot. It may further include rent or mortgage, property taxes and utilities. General Overhead Costs also comprise of the cost of racks, tables and other equipment used in staging areas. They include the cost of various security devices, as well as the cost of material handling equipment, depreciation and document destruction services, if necessary and the cost of repairs or shrinkage.

The second type of cost included is the delivery cost. This cost includes freight charges from outside vendors. These costs may also include the cost of gas, the insurance and the cost of the delivery trucks. These rates are subject to the time involved in negotiating rates and to select vendors, as well as the time to prepare shipping documents.

The third type of cost is the labor cost. This involves the receiving of incoming goods, including entering the relevant data into the computer and assigning warehouse positions. It includes the time taken to move goods from shipping to pallet positions. It is necessary for warehouse owners to be informed about the existing warehousing costs.