How to Calculate Warehouse Storage

Costs
Having the ability to properly calculate and report the actual warehouse
storage costs is a key to financial planning as well as logistics and
inventory planning. There are many factors which must be considered
when calculating these expenses. Capturing this data can be challenging,
but it is critical if a company is to know its true costs and profit, and
determine where improvements can and should be made.

Measure the outside walls of the warehouse. This should include all areas
of the building on which you are paying rent and which are considered a
part of the warehouse. If the building is oddly shaped or has been
expanded multiple times, this task can be somewhat time consuming.
Once you have completed the measurement, calculate the number of
square feet in the warehouse. For this example, we will say the
warehouse is 175 feet deep and 230 feet long. This results in a total of
40,250 square feet (175 X 230 = 40,250). This is the first number you will
need to complete your storage cost calculations.

Review the financial statements to determine the expenses incurred by

the warehouse during the previous 12 months. Add the cost to rent the
building, utilities, security contracts and the cost for any services such as
landscaping or janitorial services. Add to this the costs of payroll and any
employee benefits provided, including health insurance, 401k
contributions and taxes. Include insurance cost as well as equipment cost
such as forklifts, copiers, computers and vehicles. To this list add any
other expenses incurred by the warehouse during the time period in
question. When all the data has been collected, total the amounts to
determine the annual cost to operate the warehouse.

Divide the total expenses incurred by the warehouse by the number of

square feet in the warehouse. If the total of Step 2 was $750,000 then
your cost per square foot would be $18.63. This information is valuable
when calculating the cost of a new facility as compared to an existing
facility.

Calculate storage costs an additional way. Take the total number of units
shipped during the previous 12 months and add the total number of units
currently stored in the warehouse. This is the total number of units
handled during the previous year. Divide the total warehouse cost of
$750,000 by the number of units handled, which for this example will be
500,000 units, which gives you a warehouse storage cost of $1.50 per
unit. This calculation can help to determine overall profitability, where
improvements need to be made, and how changes can affect the cost per
inventory unit.