How to calculate pharmacy industry logistics warehousing cost ?

Logistics cost is an essential issue for an enterprise, it’s also frequently asked by warehouse owners, managers. But it’s hard to answer simply since each system has its own particularity. Today we would like to do a small summary/ reference guiding base on hundreds warehouse automation projects implementation.  

  1. Warehouse Rental or Depreciation Cost

  1. We just need to calculate the rental cost when it’s a leased warehouse. While the rents are diver from different kind of warehouse, for example, there are big gap between ambient temperature warehouse and cold storage. Generally, cold storage rents at twice or thrice the normal temperature warehouse. Even though it’s ambient temperature warehouse, the rents still can be differ greatly considering the conditions, location, with or without docking, whether it’s insulated, height(flooring height), etc.


  1. If it’s self-built warehouse, the calculation become more complicated.

Self-built warehouse cost including: land cost, construction cost, loan, etc. If take it a simple way, we can calculate the land depreciation over 50 years (someplace may 30 years only), the warehouse construction depreciation over 30 years. Surely, the market price may not follow this price in future.

  1. Equipment Depreciation Cost

The depreciation of machinery and equipment normally at 5-15years. We calculate base on 10 years simply.
However be aware of the firefighting system and air conditioning system also need to be considered for more accurate cost.
It’s also worth mentioning: A lot of enterprises think of automation equipment is the key point which lead to operation cost increasing. This is a huge misunderstanding! The real thing is, automated logistics system greatly reduce the logistics cost. This is due to the automation system can greatly improve space utilization and system processing capacity. On the other hand, it can improve operation efficiency. Analysis on real application indicates that: the biggest cost in logistics cost are labour and rents. Equipment cost account for 10%-15%, not the mainly cost. Contact us now: to discuss implementing an AS/RS into your warehouse.

  1. Labour Cost

How many people needed in a logistics center depends on its business mode and size. It’s hard to make one-size-fits-all kind of estimation. But there are rules to follow, because the logistics process is still in accordance with certain rules.
In mostly normal logistics system, they can comply with one of or some of bellowing features:

  1. Normal input and output in bulk mode (no item picking).

  2. Have a certain of order-picking (such as distribution to stores)

  3. Full item-picking (such as e-commerce)

The business throughout can be formulated as bellowing:
Q=k*Q + (1-k)*Q
K is a number among 0~1, which represents the ratio of dismounted goods. In each specific business, the split case quantity is different. Its capability of case picking and piece (split case) picking are also different. Taking pharmacy logistics center as an example, case picking can reach to 600 cases/person/day, while piece picking can be done about 800 lines only (which is very related if there’s auxiliary picking system), so that the specific business throughput can be estimated.
Piece (Split case) picking need extra packing process. The stuff numbers for package will account for 70% of piece picking. Plus on director, receiving, putaway, QC, docking, shipping, system maintenance, finance..working stations. We can calculate roughly the staff quantity in the logistic center.
In addition, picking varies dramatically from big, medium and small cases.It will cost much more for big size case picking, especially for goods like refrigerator, TV and automobile.

  1. Consumable Cost

Consumables include packaging materials, labels, computer printing paper, ink, packing belt and so on, which are directly related to business volume.
In e-commerce system, consumables are very important expenses. Therefore, we must pay enough attention to consumables, and do not underestimate the importance of a packaging bag and a label.

  1. Electricity Bills

Electricity charges should be calculated according to specific circumstances, generally not related to business volume. The power consumption of cold storage is much higher than that of normal temperature warehouse. The power consumption of automated logistics system will not be significantly higher than that of traditional warehouse.

  1. Others

The key-point in other costs is return of goods.
3 invalid actions need to be involved: delivery, return and return process. These actions are almost equally wasteful of time and resources. The analysis shows that if there is a 1% return in a system, the impact on logistics cost (excluding transportation, the same below) is about 3%. We can see the influence is a lot. Many logistics centers return rates more than 10%, some even more than 30%, and its impact can be imagined. Returns have become the biggest problem in some areas.

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