The Bangladesh Growth Story
Historically, Bangladesh has been one of the most impoverished regions in Asia. The 1971 war of independence left Bangladesh with a huge financial deficit. The end result was that the country was facing extreme poverty and famine for many years after their independence. Even before the independence, West Pakistani politicians would often call Bangladesh (then […]
Recording the Inputs (Xs) at Actionable Level
The 5 why method or the Root Cause analysis method that has been described in the Tools section plays an important role in determining that the X’s are recorded at actionable level. In this implementation of the 5 why tool, there is a slight variation from the standard methodology and hence it has been explained […]
Inventory Classification – ABC Classification, Advantages & Disadvantages
Inventory is a necessary evil in any organization engaged in production, sale or trading of products. Inventory is held in various forms including Raw Materials, Semi Finished Goods, Finished Goods and Spares. Every unit of inventory has an economic value and is considered an asset of the organization irrespective of where the inventory is located […]
What is Pugh Matrix and How to Use it ?
The Pugh Matrix is one of the most widely used methods of finding out the best solution once a number of alternate solutions have been generated. The success of the Pugh Matrix is in its simplicity. The tool is not very mathematically intensive and fairly simple to use. However, it has a record of coming […]
Why Businesses Must Prepare for Chaos and Confusion as the New Normal to Come
What Will the New Normal look Like for Businesses and is it All Chaos and Confusion? As the shuttered economies worldwide prepare to emerge from the lockdowns, the New Normal or the State of Affairs is coming into sharper focus. With uncertainty looming large as most countries are still reporting new cases and there is […]
Warehousing Costing methods vary with the business models. While some warehouses using common shared facilities may be worked up based on transaction costs, dedicated and stand alone facilities would be on a different costing model.
In this section, we shall go through the cost elements of a warehouse project briefly.
Warehouse Cost elements are primarily divided into Fixed Costs, Variable Costs and Overheads.
This cost element is included if the land and building are provided by the 3PL and not the buyer.
Incase the land and building is acquired by the 3PL, the cost of land and building may be amortized over the life of the building or as per industry standards (average 10-12 years) and proportionate monthly costs can be added. One needs to ensure that the costs are realistic and nearer to market rates for rentals.
Incase the land and building is rented by the 3PL, the cost of monthly rental along with the cost of funds for security deposit may be added to the costs.
All costs would be worked out for the term of contract period with annual escalations considered annually.
Cost of acquisition of all infrastructure including racks, MHE, Charging equipment, dock levelers and any other equipment including office equipment are itemized and amortized over the contract period or over the shelf life of the equipment as the case may be, to arrive at monthly cost of infrastructure.
IT infrastructure consists of the cost of Hardware & Cost of Software. Hardware covers all servers, desktops, printers, laptops, RF Equipment and any other IT related hardware.
Software application costs include cost of WMS based on one-time fee or individual number of user license, cost of other soft wares including mailing system and any operations related soft wares.
IT Costs are amortized over two or three years depending upon statutory audit guidelines.
Detailed manpower costing will include the cost of Management Staff, Operating staff, in-house operatives and outsourced operatives like labor, MHE Drivers, etc. Outsourced security staff costs are also added under this item heading.
In case of in-house staff, detailed calculations based on cost to the company is worked out including staff benefit, insurance, bonus, training costs, uniform, etc. along with proposed incremental cost over the number of years as per contract period.
Outsourced staff costs are also tabulated for the contract period including annual escalations.
Utilities are not fixed costs. They are monthly variable costs. The items in this category are the costs towards office and communication expenses including telephones, the internet, etc., stationary and consumables both for office and shop floor items like tapes, packing materials, etc., cost of electricity, water, fuel, etc.
Costs of office support, cost of insurance and third party liabilities and travel costs, etc. including any other statutory costs, deposits are covered here.
Cost of management time is estimated and included here. Alternatively, a percentage of corporate or regional office cost overhead is loaded.
Cost of money or interest cost on working capital for three months can be included.
Management fee can be added as a percentage of total cost or a fixed amount.
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