Flowspace ### Talk to a fulfillment consultant today Ship faster, smarter, nationwide Simplify operations with seamless integrations Grow confidently with full visibility --- The metric most important to Operations Managers is per unit cost. This is the cost for the company to pick and pack one unit destined to an end customer. For instance, when you order a t-shirt from a website, this cost represents the amount the company pays to grab it off the shelf, scan it, and put it into a box. To simplify, the main drivers of unit costs are the amount of labor you use to fulfill an order and the amount of fixed costs required to operate. There are smaller line items such as forklift leases, software licenses, and supplies, but labor and rent are really the areas most managers should focus to move the needle. (Labor Costs + Rent Costs ) / # of Units Shipped = cost per unit This is not a unique observation. Operations managers are already obsessed with labor spend. A good distribution center will have numerous concurrent projects going on focused on how to produce more shipments with less labor. These projects include time studies, trying to smooth out order peaks, and reorganizing where items are stored to minimize walking times. Rent costs, however, rarely creep into the conversation of driving costs down. This is mainly because Operations managers (I’m speaking from experience here) view the monthly rent payment as something that can’t be moved or changed. It is perceived as being fixed. The amount spent on warehouse rents is not trivial. Warehouses can range in size from 5K sq ft to 1M sq ft. Companies in Southern California are paying 60 cents to $1 per sq ft per month for warehouse space and rates will continue to rise. Compounding the problem is that the amount of space required to run an ecommerce business will also grow. In fact, one recent [article](https://www.supplychaindive.com/news/warehouses-expansion-e-commerce-boom-supply-chain/512015/) suggests that warehouses are now 143% bigger than before due to the unique requirements of [ecommerce fulfillment](/content/blog/ecommerce-fulfillment-guide/index.html). The problem is that as a business you are often not utilizing all of the space you have leased. Warehouse leases are long (5 - 20 years) and companies lease the space they will grow into over time; they do not lease space for their business today. This means there is often empty space at the beginning of these leases. Similarly, sales forecasts are seasonal or volatile, which means warehouses operate at max capacity for a few months but have idle space throughout the year. A traditional sublease does not work in these situations. In the face of rising rents on larger amounts of space, not considering rent as something to be optimized is the equivalent of leaving money on the table. Simply put, it’s time to start talking about this and there are tools, such as Flowspace, now to help businesses turn warehouse space into a variable cost and monetize empty space in their buildings. --- Last Updated: December 8, 2017 Category: Supply chain and logistics --- ### Why your ecommerce fulfillment strategy is now a margin strategy ### What is lean manufacturing? 5 principles explained ### What is intralogistics? Meaning, importance, & more ### Navigating recall management: The 3 critical components to know ### Supply chain agility: Meaning, benefits, & how to achieve ### Supply chain bottlenecks: Challenges, causes, & solutions ### Supply chain mapping: A strategic approach to smarter fulfillment ### What is cost per unit? How to calculate it and strategies to reduce it ### How to improve reverse logistics: 10 tips for success ### Essential logistics KPIs for optimizing supply chain performance ### What is reverse logistics? An in-depth look ### Navigating fresh headwinds: How to mitigate risk in your supply chain ### Breaking down the perfect order supply chain KPI ### What is the cash-to-cash cycle? Formula, calculation, and how to optimize ### Fill rate: Definition, importance, & how to calculate ### What are Outbound Logistics? Processes & KPIs ### How do value chain vs supply chain compare? ### 8 supply chain KPIs you need to be measuring ### What are Inbound Logistics? Processes & KPIs ### The top 8 food & beverage supply chain challenges ### 9 challenges your beauty supply chain could face & how to overcome them ### How to optimize your CPG supply chain: 5 steps ### How to develop a customer-driven supply chain strategy ### 4 advantages of green logistics in supply chain management & how to apply them ### The importance of creating a flexible supply chain strategy ### How to overcome supply chain disruptions ### Why is supply chain visibility important? ### Here’s what you need to know about sustainable packaging ### Supply chain planning for brands ### Physical distribution: What is it and why is it important ### Supply chain planning for new businesses: 5 steps to get started ### What is supply chain analytics and how does it affect your logistics ### How have supply chain logistics evolved in just 1 year ### Why you should outsource supply chain management ### What should modern supply chain management look like ### How to prepare for Chinese New Year 2021 ### Achieving competitive advantage through supply chain optimization ### Lean supply chain management guide: How to reduce lead times ### What is supply and demand balancing ### How to expand to new distribution channels ### How to scale growth: Overcoming supply chain complexities ### Navigating uncertainties and strengthening your supply chain ### How the coronavirus is disrupting the supply chain industry ### 7 strategies for reducing supply chain and logistics costs ### Globalization and supply chain management in 2025: A guide for ecommerce brands ### What is the future of supply chain and logistics? --- Start simplifying fulfillment with Flowspace today Discover how Flowspace can simplify fulfillment and help your brand scale faster, with no long-term contracts or hidden commitments.