Want to More Accurately Estimate Your Parcel Shipping Costs?
A huge consideration in many businesses is how much one can expect to spend on shipping costs.
With steadily rising costs in shipping, this consideration is more important than ever. The purpose of this post is to provide an introduction as to what issues arise when attempting to estimate parcel shipping costs, an overview of solutions to these issues, and suggestions on how to best implement these solutions.
How are Parcel Shipping Costs Calculated?
The issues in accurately estimating parcel shipping costs stem from the fact that there are so many variables to consider during the shipping process. While the following is not an exhaustive list, it will provide a general starting point in what goes into shipping costs.
DIM or dimensional weight was implemented by carriers to combat the issue of having to ship objects with dimensions that may prevent easy transport. In order to address this issue, these carriers developed an equation to calculate the cost of shipping objects based on the following equation: length x width x height / DIM factor. Each company has its own DIM factor. This allows the carrier to determine the cost of shipping based not only on the weight of the commodity to be shipped, but also the dimensions.
Therefore, even if your item only weighs a few pounds, it may be shipped at a higher DIM weight if the item requires a larger package.
Carriers define shipping zones by zip code. If your shipment stays within the “zone” it was shipped from, the cost will be relatively low. However, if your parcel needs to travel through multiple zones, the price of shipping can grow exponentially.
In a world where large companies offer two or even one-day shipping, it can be hard for small or mid-sized companies to compete. If your customer is insisting on next-day delivery, it’s going to cost much more than the standard delivery speed of around three to seven days.
Depending on the value of the product, you may want to consider insuring your parcels through the carrier. That way if they are lost, damaged, or stolen, you won’t have to face as many charges in replacing the item for the customer.
Surcharges can generally be thought of as “hidden” or “unexpected” costs of shipping. These may come in the form of a fuel surcharge, a “wrong customer address” surcharge, or return fees.
Value/fragility of Shipped Product
We’ve already touched on this point lightly, but the value or handling requirements of a product can factor in heavily to the cost of shipping. High-value items like jewelry or gold have specific requirements, as well as more fragile objects like ping-pong balls.
What Solutions are Available to Lower my Parcel Shipping Costs?
While the best solution for your business is going to be unique and based on your individual needs, there are some general techniques you can employ to overcome these shipping costs.
- Use a Shipping Cost Calculator. Some of the major carriers, such as USPS, UPS and FedEx, each provide their own shipping cost calculators.
- Offer Flat Rate Shipping. Another option is to offer one flat rate for shipping regardless of the factors affecting your product.
- Build Cost of Shipping into Your Product. To combat these rising costs, you may decide to just raise your prices for your product, and offer free shipping.
- Use a Third-Party Logistics Company. A 3PL like Redwood Logistics can help you navigate these shipping costs and get the best rates possible through our trusted network. 3PL companies are experts in a multitude of issues in the logistics industry. The benefit here is that you don’t have to spend time learning and worrying about the system, your 3PL does all the heavy lifting for you.