For most SMEs, outsourcing warehousing costs less than running your own until your volume is high and steady enough to keep a team and a building fully busy. The catch is that the real cost of an in-house warehouse is rarely the rent. It is everything around it.
This post breaks down where the money goes, so you can compare both options honestly.
The costs of running your own warehouse
Most owners compare outsourced fees against rent alone. A fair comparison includes every line below.
| Cost | Running your own | Outsourcing |
|---|---|---|
| Space | Lease or purchase, paid whether the space is full or empty | Pay for the space you use |
| Staff | Salaries, leave cover, training, overtime at peak | Included in the service fee |
| Equipment | Racking, forklifts, scanners, packing stations | Provided by the warehouse |
| Systems | Inventory software and set-up | Usually provided |
| Utilities and upkeep | Power, insurance, maintenance, security | Shared across customers |
| Flexibility | Fixed capacity, slow to scale up or down | Add or reduce volume as needed |
| Your time | You manage the warehouse and its problems | You manage the relationship |
The pattern is simple. In-house costs are mostly fixed, so you pay them in quiet months too. Outsourced costs are mostly variable, so they rise and fall with your orders.
A simple way to compare
For one month, add up your total in-house warehouse spend: rent, wages, equipment, software, utilities and insurance. Divide it by the number of orders you shipped.
That gives you your true cost per order. Compare it with the per-order or per-pallet quote from an outsourced provider. Many owners find the in-house figure is higher than they expected, especially in slower months.
When running your own makes sense
- Your order volume is high and predictable all year
- You need tight control over a very specialised process
- You already own or lease space you can fill efficiently
- You have a team that can manage operations, not just packing
When outsourcing makes sense
- Your volume is growing, seasonal or hard to predict
- You would rather spend capital on stock and marketing than on a lease
- You sell in both Singapore and Malaysia and want a base near the border
- You do not have time to manage staff, space and systems
- You need cold storage, which is costly to set up yourself
Questions to ask any warehousing provider
- How are you charged: per pallet, per order, per item, or a mix?
- What is included in the fee, and what costs extra?
- Is there a minimum volume or contract length?
- How do I see my stock and orders at any time?
- How do you handle peak season?
- Can you also deliver to my customers, including across the border?
How Packargo can help
Packargo Express offers warehousing and fulfilment, cold storage at our Kulai, Johor warehouse, freight forwarding and door-to-door delivery between Singapore and Johor Bahru, so storage and delivery can come from one provider.
Not sure which option fits? Send us your rough monthly volume and what you sell, and we will help you compare.