As a continuation to our recent blog post, we will now build on to the breakdown of 3PL pricing by explaining the activity of handling. This is the easy part because handling is simply the moving of product within the warehouse. Handling can be separated into two groups: receiving (inbound) handling and outbound handling.
2. Handling- Inbound and Outbound
Inbound Handling
Inbound Handling is the process of receiving product into the warehouse upon delivery. There are two components to this function: unloading and putting away into storage.
Unloading can either be done with a forklift (if the product is palletized) or with manual labor (termed “Floor Unload” for non-palletized cases or handling units). Unloading a floor loaded container can be time consuming and take additional labor because products must be taken off the container and palletized. More often than not, unloading will have its own cost, and is usually billed a single flat rate or by the labor hour.
Once the items are offloaded and palletized, the product must be safely transported to its put away location. Inbound Handling is the process of taking offloaded pallets and moving them to their allocated storage space. Most 3PLs charge inbound handling by the pallet (or any other primary handling unit), and pallets generally should have only one SKU per pallet.
Order Processing and Outbound Handling
Most 3PL customers see the outbound handling function as the most critical component of the entire warehousing process; that’s because this is where their product is actually being prepared to get out to the market. There are a variety of ways 3PLs can bill for outbound activities, but at the end of the day, it’s the following activities that end up incurring costs:
- Order Processing: Regardless of how large or small the order is, there is a certain level of labor involved (both clerical and warehouseman) to complete the order process. This will include getting the order into the warehouse management system, printing out and handling the order documentation, and getting the order out to the warehouse and pulled.
- Picking: Picking is the actual act of going to the item storage location and removing it to fulfill an order. The costs of picking are determined by the handling unit and number of lines on an order. Piece picking is generally less costly than case or pallet picking, because you can handle more at a time. Therefore, there is usually a specific rate for each unit of measure. There might also be a line charge, which accounts for travel time to various locations if there are several line items on an order.
- Accessorial Activities: The first two functions, order processing and picking, are the standard activities on a given outbound order. However, oftentimes there are special requests or requirements to fulfill the order. These activities will have rates in place depending on the labor involved. This is something that should be reviewed and a process put in place before fulfilling orders so that the right cost is in place and no activities are missed.
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