Supply Chain & InventoryFree calculatorPDF, Excel, Word exportWarehousing and Distribution

3PL vs In-House Warehouse Cost Calculator

The make or buy decision for warehousing depends on volume. A 3PL charges mostly by use, while your own building is mostly fixed cost. This calculator compares the two at your volume and charts the range around it.

Your numbers

Average pallets stored

pallets

Pallets handled per month (in plus out)

pallets

In-house fixed cost per month

Rent, management, utilities, equipment and overhead that do not move with volume.

In-house variable cost per pallet handled

Labor and consumables that scale with handling.

3PL storage rate per pallet per month

3PL handling fee per pallet

Charge per pallet in or out.

3PL monthly minimum

3PL admin, transport and other fees per month

Your results

In-house cost per month

$111,800

3PL cost per month

$102,600

3PL cost before minimum

$102,600

In-house minus 3PL

$9,200

Positive means the 3PL is cheaper.

In-house cost per pallet handled

$22

3PL cost per pallet handled

$20

Cost comparison only. Service levels, control, security, transition cost and contract risk also matter and are not modeled.

Save results:

Monthly cost vs pallets handled

Sweeps Pallets handled per month (in plus out) from 500 to 12000, holding your other inputs fixed.

Run this on real ERP volumes

Optional: pull actual pallets, orders and costs from your ERP into the comparison.

Optional. The tool and every export work without this. No spam.

How to use it

Enter the pallets you hold and the pallets handled each month. For in-house, split cost into fixed and variable, using the cost per pallet calculator if needed. For the 3PL, copy the storage, handling, minimum and other fees from the quote. Compare both totals and use the chart to see whether volume growth or decline changes the answer.

Request a quote with all fees itemized
Include receiving, labeling and returns fees
Use average stock, not peak, for storage
Add transition and integration cost separately

The method behind it

In-house cost equals fixed cost plus variable cost times pallets handled. The 3PL cost equals the larger of the contract minimum and the sum of storage on stored pallets, handling on handled pallets and other fees. The lines on the chart cross where the two costs are equal. Below that volume, one option is cheaper, above it the other is, which is the standard fixed versus variable cost tradeoff.

Reading the result

At 3200 pallets stored and 5200 handled, the example in-house cost is about 111,800 and the 3PL about 102,200 per month, so the 3PL looks cheaper by roughly 9,600. At much higher volume the in-house line flattens relative to the 3PL, so it would win. Remember that a 3PL contract may include a term, minimum commitment and price escalators that change the outcome in later years.

Common mistakes

Comparing a partial 3PL quote with a fully loaded internal cost is the most frequent mistake. The second is ignoring one-time costs of moving inventory, systems integration and severance. The third is leaving out service differences such as cut-off times, accuracy and flexibility, which can outweigh a small cost gap.

Comparing partial quotes to loaded cost
Ignoring transition and integration cost
Assuming volume stays flat for the contract term
Overlooking service level and control

Frequently Asked Questions

When does a 3PL make sense?

Typically when volume is low or variable, when you lack space or expertise, or when you need to enter a region quickly. Fixed cost in your own building is hard to scale down, while a 3PL charges by use.

What fees should a 3PL quote include?

Storage per pallet, handling in and out, order or line fees, minimum monthly charge, account management, labeling, returns, special projects and any technology or integration fees. Ask for a complete rate sheet.

How do I find the breakeven volume?

Look at where the two lines cross on the chart. Mathematically, set in-house fixed plus variable times volume equal to the 3PL bill and solve for volume, keeping storage assumptions fixed.

Does this include transition costs?

No. Add one-time moving, setup and integration costs separately and spread them over the contract term to see the full effect on the monthly figure.

Netray can help extract the volumes and cost data from your ERP so the comparison uses actuals rather than estimates.

Talk to an Expert Explore More Free Tools

Related Tools

Costing & Finance

More Supply Chain & Inventory tools

See all

Back to All Tools