# How do you model landed cost for pre-orders with long lead times? | LandedCost HQ

Source: https://landedcosthq.com/blog/2026-10-08-3pl-storage-pick-pack-fees-per-unit-landed-cost/

## The costs the landed-cost model forgets

Classic landed-cost math stops at the warehouse door: product, freight, duty, insurance, done. But the 3PL invoice keeps going. Monthly storage per pallet or per cubic foot, per-unit pick fees, per-order pack fees, receiving fees, and account management charges all land after the goods arrive. For a DTC brand, these post-arrival costs can rival the freight bill, and they fall unevenly: the SKU that sells through in three weeks and the SKU that sits for eight months have wildly different warehousing costs per unit.

The distortion is invisible because the costs live in different budgets. Landed cost is computed by the sourcing team at purchase time; 3PL fees are paid by operations every month. Nobody reconciles the two, so the product that looked profitable at a forty percent margin is actually earning fifteen once warehousing is allocated. The P and L knows the truth in aggregate, but no SKU-level decision ever sees it.

## How storage punishes slow movers

Storage fees are rent on your inventory, and slow SKUs pay the most rent. Take two products with identical ex-factory cost and freight. Product A sells through its inventory in a month; product B takes nine months. If storage runs a dollar per unit per month, product B carries nine dollars of warehousing cost that product A never sees. The original landed-cost model priced them identically, which means it overstated product B's margin by the full storage bill.

The fix is velocity-adjusted landed cost: allocate actual storage fees to SKUs based on their average days in inventory. This requires the 3PL's data, monthly storage charges by SKU and inventory aging, but most 3PLs report it. Once allocated, slow movers reveal their true economics, and the decisions change: mark down faster, order smaller quantities, or discontinue. The storage fee is also a buying signal. A product whose velocity-adjusted margin is thin should be reordered in smaller batches, because every extra unit is extra rent.

## How pick-pack punishes small orders

Pick-pack fees are fixed per order and per unit picked, which makes them regressive: small orders bear more cost per unit than large ones. A twelve-dollar pick-pack fee on a two-unit order adds six dollars per unit; on a ten-unit order it adds a dollar twenty. If the brand's average order is small, the per-unit pick-pack cost can exceed the per-unit freight cost, and the landed-cost model that ignored it is missing one of the largest cost components.

Model it from the order profile, not the average. Compute the distribution of units per order, apply the fee schedule to each band, and weight by volume. The result is a per-SKU pick-pack cost that reflects how customers actually buy. This also exposes the pricing lever: free-shipping thresholds and bundle incentives that raise units per order directly reduce per-unit pick-pack cost, which is a margin gain the landed-cost model can finally see.

## Building the warehousing layer

Add warehousing as an explicit layer in the landed-cost model, computed quarterly from actual 3PL invoices. Storage allocated by SKU-months in inventory, pick-pack allocated by the order profile, receiving and special-project fees allocated to the SKUs that caused them. The layer should be visible alongside product, freight, and duty, not buried in overhead, because SKU decisions need SKU costs.

Then use it. Reorder quantities should reflect velocity-adjusted margins, not ex-factory margins. Slow movers get smaller buys or exit plans. Promotions get evaluated on fully loaded cost, which stops the classic mistake of discounting a slow SKU whose warehousing already ate the margin. And 3PL negotiations get sharper: when you know exactly what storage and pick-pack cost per SKU, you can price competing 3PL proposals on your actual profile instead of their rate card. The brands that model this layer stop being surprised by their own warehouses.

## Should 3PL fees be in landed cost or in operating expenses?

For SKU decisions, they belong in the landed-cost model as a warehousing layer, because they vary by SKU velocity and order profile. For financial reporting, they stay in operating expenses. Keep both views: the accounting view for the books, the decision view for buying and pricing.

## How do you allocate storage fees fairly across SKUs?

By the driver's actual consumption: cubic-foot-months or pallet-months per SKU from the 3PL's reports. Avoid allocating by revenue or by units sold, which punish fast movers for the sins of slow ones. The SKU that occupies the space pays for the space.

## Can you negotiate these fees down?

Storage rates and pick fees are negotiable, especially with volume commitments and longer terms. But the bigger lever is usually operational: faster sell-through, smaller reorders on slow SKUs, and order profiles that raise units per shipment. Negotiate the rates and fix the drivers.