Understanding Warehouse Costs and Risks

Editor’s Note: Presented here is a revision of an article written nearly two decades ago by professor Tom Speh, of Miami University, Oxford, Ohio. When written, the purpose of this work was to provide a guideline for public warehouse operators and their customers. Both buyer and seller were accustomed to a transactional pricing and costing system that combined a monthly price per unit for storage with the costs of materials handling and administrative services. The vendor needed to make certain that this pricing would yield a profit, and the buyer wanted to be sure that no money was left on the table. In revising this work, we recognize the need to create a mechanism that is useful for wholesale distributors, as well as logistics service providers who are not using unit pricing. Both buyer and vendor need to understand the process, in order to compare price to actual value of the services rendered. KBA