The cost of running a warehouse includes far more than rent: labour (usually the largest cost), occupancy costs such as rent, outgoings and utilities, equipment and racking, software, insurance, maintenance, packaging and management time. To compare with a 3PL, add all of them up for a year, divide by orders shipped, and include the cost of space you pay for but don’t use outside peak.
Many businesses underestimate the cost of running a warehouse because the costs sit in different budgets: rent in property, wages in payroll, forklifts in finance leases. This guide lists every cost to include, shows how to work out your cost per order, and explains how to compare running your own warehouse with using a 3PL.
What costs are involved in running a warehouse?
| Category | What to include |
|---|---|
| Labour | Wages, overtime, casual and agency staff, super, payroll tax, workers’ compensation, training and staff turnover |
| Occupancy | Rent, outgoings, council rates, electricity, water, cleaning, security and fit-out |
| Equipment | Forklifts (lease or depreciation), servicing, batteries or gas, racking, shelving, pallet jacks, scanners |
| Technology | WMS or inventory software, integrations, devices, label printers and IT support |
| Insurance and compliance | Stock and public liability insurance, racking inspections, safety training and licences |
| Consumables | Packaging, pallets, stretch wrap, labels and tape |
| Management | Warehouse manager, supervisors and the time other managers spend on the warehouse |
| Hidden costs | Empty space outside peak, stock losses, errors and returns, lease commitments and make-good at the end of the lease |
Labour is usually the largest single cost of running a warehouse, so labour productivity improvements often save more than cheaper space.
How do I calculate the cost of running a warehouse per order?
- Add up 12 months of every cost in the table above.
- Exclude shipping (or track it separately), so you can compare like with like.
- Divide by orders shipped in the same 12 months for cost per order, and by average pallets stored for cost per pallet.
- Check seasonality: work out cost per order in peak and quiet months, because fixed costs spread very differently.
Our warehouse cost calculator walks you through it, and our guide to fulfillment cost per order shows the formula in more detail.
When we work through the cost of running a warehouse with a business for the first time, the number is almost always higher than they expected. The usual gaps are management time, equipment leases, staff turnover and the space paid for all year but only used at peak. Get these into the calculation before comparing with 3PL quotes.
How do I reduce the cost of running a warehouse?
- Cut walking: better slotting and layout raise picks per hour.
- Reduce errors: scan picking and packing checks lower re-work and returns. See picking accuracy.
- Use height: taller racking or a mezzanine can delay a move to a bigger building.
- Clear slow stock: excess and obsolete stock takes space and labour.
- Match labour to demand: roster to order patterns and use casuals for peaks.
- Standardise: clear SOPs reduce training time and mistakes.
- Review packaging: right-sized boxes cut both material and freight costs.
Is it cheaper to run my own warehouse or use a 3PL?
| Own warehouse | 3PL | |
|---|---|---|
| Costs | Mostly fixed; cheaper per unit at high, steady volumes | Mostly variable; you pay for what you use |
| Control | Full control of process and staff | Managed through contract and service levels |
| Peaks | You hire and manage extra staff and space | The 3PL flexes |
| Commitment | Lease, equipment and staff | Contract, often shorter and more flexible |
| Best for | High, stable volumes or specialised handling | Growing, seasonal or multi-location businesses |
The honest answer depends on your volumes and how efficiently your warehouse runs. Many businesses improve their own warehouse first, then compare the improved cost with 3PL quotes.
Frequently asked questions
What is the biggest cost of running a warehouse?
Usually labour. Rent is the most visible cost, but wages, overtime and staff turnover typically add up to more.
How do I compare the cost of running a warehouse with a 3PL quote?
Work out your full annual cost excluding shipping, divide by orders shipped, then compare with 3PL quotes priced on the same order data, also excluding shipping.
Should I include my own time?
Yes. Time spent by owners and managers on warehouse issues has a real cost, even if it is not on a warehouse invoice.
When does running your own warehouse make sense?
When volumes are high and steady, products need specialised handling, or the warehouse is part of your competitive advantage. Even then, review your costs every year.
Can a consultant help reduce the cost of running a warehouse?
Yes. An outside review often finds savings in layout, slotting, labour planning and processes that are hard to see from inside the operation.
Want to know your true warehouse cost?
Warenous warehouse consultants calculate your real cost per order and show you where to save, or whether a 3PL would be cheaper.
Book a call with a warehouse consultant
