Warehousing & storage cost breakdown: space times time, not a product

Warehousing differs from manufacturing in a basic way: cost isn't tied to TRANSFORMING a product, it's tied to HOLDING a product intact over a given amount of SPACE and TIME. The two must be multiplied together, not costed separately.

The costing unit: ONE CUBIC METER (or ONE PALLET) STORED FOR ONE MONTH - not "one unit of goods", since the same lot stored for one month versus six months costs entirely different amounts even though the quantity never changed.

The process sequence

1. Receiving & counting.
2. Storage - racking, high-bay.
3. Inventory management over time.
4. Order picking.
5. Repackaging if needed.
6. Shipping out.

Two features unique to this industry

1. The unit is SPACE TIMES TIME

Warehouse cost is tied to the area/volume occupied AND the time stored - the two must be multiplied to get a lot's real cost, rather than costing "per cubic meter" while ignoring time, or the reverse. A small lot sitting for a long time can cost as much in storage as a large lot sitting briefly.

2. Shrinkage - replaces scrap, and it happens while NOTHING is being done to the goods

Loss, damage, and expiration of stored goods is the equivalent of manufacturing scrap, but it differs in that it happens while goods are simply SITTING in the warehouse - no processing step touches them. The cause is entirely dwell time and storage conditions (temperature, humidity, handling impact), not a manufacturing process error.

Everything else

Material (racking, pallets, repackaging supplies at outbound - by square meter/unit, not weight). Machinery (forklifts, high-bay racking systems, warehouse management software if costed separately - OWNED or under a long-term lease). Labor (warehouse staff by shift, costed per receiving/shipping transaction handled). Consumables (packing tape, strapping). Subcontracted work (periodic cycle-count service, expired-inventory disposal service). Rework (repackaging goods with damaged packaging while the contents are still intact).

Packaging (only when repackaging before shipping out). Freight (internal warehouse moves, different from the intercity freight of the transportation industry). Overhead - warehouse space depreciation or rent per square meter, usually the LARGEST line in this industry, playing the same role land rent plays in crop farming.

Evidence

• Daily receiving/shipping tickets.
• Periodic cycle-count records, book inventory against physical count.
• Warehouse space lease contract.
• Damaged/expired goods log for the period.