How do warehouses charge storage?

We wrote this article, because there is a very small segment of the population that likes to criticize and be-rate storage facilities and their workers for the way storage is billed. This is unfortunate, but we believe it is mostly due to ignorance of how the warehousing/storage industry operates and/or a lack of willingness to understand: “Why?” It is believed that, that segment feels the industry is taking advantage of them, and can then become very hostile to those around them when they feel this way. We are hoping that by writing this article, we can do our part to shrink that percentage even further by educating and make you feel better about how your storage rates are calculated.

To start off, there are many ways and systems that a warehouse could charge storage. It could be by the day, week, month, or a yearly rate. It could be by the square or cubit foot occupied. It could be a predefined amount for an object that they deal with regular basis and have a flat rate already predetermined for you because they already know the space required. All warehouses chooses a system that works best for them and the MAJORITY of their cliental. “Your goal” is to understand what system the warehouse/storage facility are using, and determine whether you are in the minority or majority. Do NOT waste your time telling them what their warehouse billing system should be. You are wasting your time and getting frustrated over something that will not change. While warehouse managers appreciate feedback for improvement, the warehousing industry has been around a long time and changing a billing model that works for them and most their cliental is not high on their list of things to do, especially for those of you that fall in the exception (minority). If you do not like their billing system, no problem, find one that you do like. Never berate honest hard workers for running a warehouse system that they have no control over to change, especially if they are using an industry standard that has been around for decades. This article is written to help YOU avoid these misunderstandings, save YOU that frustration and for YOU to understand the most common industry standard for warehouse billing.

What is industry standard for billing storage?

The most common billing system that warehouses use today, is to bill by “the calendar month or any part thereof”. This is industry standard. Whether your item was there one day of that month, part of the month or the whole month is irrelevant. If it was in their warehouse for any small part of that calendar month, you are paying the whole month. Reoccurring storage is always billed on the first of every month. It is not pro-rated. Important clarification: Monthly does NOT go a month from the physical date that it arrives. Let me be very clear here, if it arrives on October 30th, you are paying for October monthly storage, and then November storage is billed on the first of the month even though last storage was billed only 2 days ago. Most warehouse billing system calculations are automated, so making any changes is a big deal to them, which is why a lot of warehouses take a very strong stance against changing anything. The partial month you are complaining about was already factored into their monthly rates. If you do not like this, then always make sure your item comes into the warehouse at the beginning of the month, not the end. Or use a non-industry standard warehouse that uses a daily or weekly model. Remember, the warehouse has no control when you bring things in or take them out, but you do. For those that like to blame your house closing date or the mover/carrier transporting it, remember that is not their problem, its yours.

Some things people like to complain about.

Now for those that like to argue, or just to understand why, let me explain a few things. This system came into place because it makes the most sense for everyone involved, nation wide, whether you agree or not is technically irrelevant. So, “Why monthly?” After all someone(s) had to choose this interval, and where did it come from. Well, most expenses associated with maintaining any warehouse are generally monthly and/or easily rounded into a monthly configuration (rent/utilities/payroll/etc.). If the costs associated with running a warehouse are monthly, then it makes the most sense to have the income generated for that space to also be monthly. The warehouse still must pay these monthly expenses whether you were their part of the month or the whole month, so to have that space available for you to receive your product, pro-rating basically does not work for them, which is why billing for most storage facilities are always done as a monthly rate based on the calendar month.

The next comment some people will argue, “Why can it not be a month from when it arrives?” First off not every month is the same length, is that 28 or 31 days from when it arrived? Second, it would more than triple the office workload running storage billing everyday, vs invoicing everyone once a month. If we took your advice, I guarantee your monthly storage bill would be higher to cover the extra office overhead costs to do what you are recommending. Everyone likes simple billing and less work; what you are recommending is considered complicated billing and more work.

Another comment for those that like to ask the question, “Why are the storage charges not pro-rated for the month?” or “Why don’t they bill daily/weekly vs. monthly?” Honestly, they could be, but again, the warehouse would have to charge more monthly to make up the shortages from the pro-rating or smaller time intervals. There are warehouses out there that will bill daily/weekly/monthly and/or pro-rate accordingly, but they NEVER mix and match billing styles, it is ALWAYS one billing model for everything. If monthly works best for most their cliental, then they are going to do monthly for everyone. If daily or weekly works best for most their cliental, then they will adopt accordingly for the interval they pick. If you compared rates from the different time interval billing systems from those companies that have decided your recommended system works better for their cliental, you’ll usually notice a common trend. The smaller the time interval, the higher the rate when you convert it back to the same time common interval. For example, where one company charges $100/month, the weekly rate would be $40/week and daily $10/day. If you were to convert the weekly/daily rate to monthly suddenly weekly is costing $160/month and daily is costing $300/month. While there may be situations that a few people will win better on a weekly or daily rate, most of us save a lot more money on the monthly rate and it is a lot simpler and less paperwork to administer. Sure, the warehouse could offer pro-rating if their inventory/accounting system allowed for it, but the monthly rate would now have to be a lot higher than what it would be if it was not pro-rate.

The first thing people like to do when entering an argument, is give illustrations of why they are right. Customers start to compare storage/warehousing to totally unrelated industries like utilities or phone companies to make their point on why they should get a storage discount or not pay the proper rate. You need to remember: Those industries have done their own internal comparison and have built their models off a totally different criteria that works best for them. If you like to argue and really need another industry to compare against, while this is still not the same, a better comparison would be home real estate. When you rent a home, it is generally rented for the calendar month, which is a similar system to warehousing. Whether you were living there every day or not, is totally irrelevant, the cost is still monthly that you have to pay for the place. You do not get a discount for the days you did not stay there.

Summary

To summarize, all warehouse rate models are based on win some, lose some principle and the law of averages. Warehouses that use a monthly system, have already taken partial months into consideration when setting their rates. Believe it or not, but those partial months were taken into consideration when the monthly rates were set. Yes, there might be some exceptions where the model you are suggesting might save YOU some money and be better for YOU and yourself ONLY. Unfortunately, warehouse/storage rates do not revolve around you, just like when you hear that the world does not revolve around you. Warehouse rates are based on law of averages that generally work out best for everyone in the long run. Currently, billing by the calendar month or any part there of is exactly that. This is an industry standard that has been running for decades and it is considered a very fair billing model by the moving and storage industry. If it was not, it would not be considered industry standard. Again, there are other models out there, that do utilize daily or weekly rates, but they are generally considered the exception, not the norm and from our observation, more expensive for everyone in the long run. Those models are usually only used by warehouses where it makes more sense for either them or their cliental that deal with extremely fast turning product on a regular basis.

We hope this gives you some insight into the storage industry and why the storage/warehousing industry is the way it is. Always remember to ask which time/space model they are using and when reoccurring storage gets billed. If you do this, you should never be surprised.