REAL COST OF RUNNING A WAREHOUSE

Many customers underestimate the real cost of running a warehouse in Malaysia.  To assist in your budgeting, please remember to take the following costs into consideration:

- Rental of the warehouse.  Remember to include the following: the monthly rental itself and do remember to take into account areas to be utilised for aisles and for staging.  Assuming rental at RM1.00.  The staging and aisle area can be conservatively assumed to be 30%, so the effective rental for storage area only is 1/0.7= RM1.43 per square foot of storage area.

- The deposit and advance rental and utilities deposit.  The standard in Malaysia is two months deposit and one month advance.  The utilities deposit is one month’s expected electricity and water consumption (usually determined by the landlord).  Usually deposits are returned free of interest therefore there is both an impact on cashflow and on the opportunity cost of the deposits.

- The cost of racking (if any).  This can be fairly substantial and depends on the load the racks can bear and the depreciation period of the racking.

- The cost of security.  It is usual for either security personnel to be stationed at the warehouse or some form of CMS (Central Monitoring System) to be employed.

- The cost of pallets to be used in the warehouse.

- The cost of any forklifts and pallet trucks utilised.

- The cost of the warehouse manager and other management staff.

- The cost of the labourers, tally clerks and so on.

- The cost of any fire fighting equipment employed, for example fire extinguishers, hosereels and so on and the cost of maintenance - to get the inspection certificate and so on.

- The cost of the Warehouse Management System.  This can range from bin cards to Excel spreadsheets to full blown computerised online warehouse management systems.

- Any stock losses that may be incurred.  Hopefully, these will only arise due to human error.  However the possibility of pilferage cannot be discounted.

- Cost of electricity and diesel to operate the material handling equipment.

- Cost of wasted space due to non optimal utilisation of the available space. For example the space might be insufficient during festive periods and partially empty in the middle of the year (the traditional slow period in Malaysia).

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If you require any clarification of the above, or any cost estimates to assist in your budgeting or a quotation against which to compare whether you can save money by outsourcing your logistics requirements, kindly contact us.

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