Shipping is a necessary service that companies must tackle in order to get their products into the customer’s hands safely. The associated shipping costs can be a burden on a company, especially if you don’t know what can affect these costs.
Determining what effects shipping costs is vital to saving money. You must understand how all of the many factors can impact a business’s shipping margin so that you can make the correct decisions. Let’s review what the factors are that impact cost, what the most frequently used carriers are and some tips to reduce your shipping costs.
Shipping Cost Factors
There are four main factors that are considered when calculating shipping costs. These consist of the packaging dimensions, the weight of the package, where the package is shipping from to where it is going, and your expected delivery time. There are other factors that affect costs as well, aside from those just mentioned.
To get the weight of the package, you simply need to weigh the package on a scale. The weight of the package in total needs to be used, not the weight of the product itself, when calculating postage by weight. Adding package materials such as bubble wrap, shredded paper, foam, etc., will likely increase the weight of the package.
The extra weight of the materials could increase shipping costs. If a package is smaller but quite heavy, it may be best to get a shipping cost based on dimensional weight or volume. This could be cheaper than using the weight of the package.
Dimensional weight, often referred to as volumetric weight, is a pricing technique. This uses an estimated weight based on the length, width and height of a package. To get the dimensional weight, you multiply the height x width x length of the package and divide this by the actual weight of the package.
Couriers often use dimensional weight and product weight together in order to calculate shipping costs. Using the dimensional shipping weight can oftentimes come out cheaper for certain packages. It is best to buy an assortment of sizes of shipping boxes to try to reduce the overall package volume, and thus decrease the shipping costs.
Shipping Origin And Destination
You can assume that shipping a package further from the origin will be more costly. For example, shipping to Italy would be more expensive than shipping within the continental United States.
In the United States, shipping rates are based upon designated shipping zones. Shipping zones are essentially a measure of the origin to the destination, with the mileage differing within each of the zones. All of the main logistics companies such as USPS, FedEx, and UPS use these to calculate costs for domestic delivery.
Depending on the service that you offer, you could be looking at higher costs. If you offer one-day shipping, you would have to choose an overnight delivery service. Overnight shipping will cost the most compared to other methods, such as the standard 3-5 business days shipping time. There is a direct correlation between the shipping time to the cost. It is simply the quicker you get the product to the customer, the higher the cost is likely going to be.
What else can potentially affect my shipping costs? Some other things that may increase the costs are insurance, duties and taxes, special types of handling, or any random issues that are encountered in the shipping process.
Shipping insurance protects you and your business if items are lost, stolen or damaged during the shipping and handling process. This is critical if you have expensive or fragile items that could be susceptible to harm. The cost of insurance is rather low and could vary between the carriers.
Random issues may be encountered when shipping your product. Some fees may be associated if items are returned to the sender, the package takes multiple tries to be delivered, or an address needs to be amended while in transit.
Some packages require special handling. Dangerous goods such as corrosives, flammable liquids, oxidizing substances, etc. will require special handling. This will drive a higher cost due to fees designated for these types of materials.
Duties And Taxes
If you ship globally, there are fees that you will encounter. These are referred to as duties and taxes. These are dependent upon what is being shipped and the value of the item. There are two types of taxes that must be understood. DDU (delivery duty unpaid) is when the buyer is responsible for imported duties. DDP (delivery duty paid) is when the seller is responsible for the importing duties.
There are several types of shipping services that are available to use. However, the three main companies are USPS, Fedex and UPS. Each of these companies has its own benefits and downsides which could impact shipping costs.
The United States Postal Service is an independent federal government agency that provides postal services to all residences in the United States. The USPS is ideal for those who ship small and light products. Along with being the cheapest option for small packages, they offer free pickup, Saturday delivery and they deliver to mailboxes & PO boxes. They are not known for their customer service and have poor tracking compared to their counterparts.
FedEx and UPS are fairly similar. Their services, pros and cons, and reviews are very comparable. Users often cite the location as the primary driver of choosing between UPS and FedEx. FedEx offers great package tracking, Saturday delivery with a business account and discounts to high volume accounts. FedEx has fewer offices compared to UPS, they do not offer free package pickup and they tend to be an expensive carrier.
The United Parcel Service specializes in delivering packages in a speedy and secure manner. They are known for their reliability and comprehensive tracking services. With UPS, you are guaranteed express shipping, you receive great tracking, and their heavy shipments are affordable. Saturday deliveries may cost extra, they do not offer free package pickup, and like FedEx, shipping through UPS can be expensive.
How to Reduce Shipping Costs
In order to get your product to your customer quickly and safely, here are some tried and tested methods though that actually can reduce the costs if you put a little bit of effort into them.
Some ideas to reduce cost are as follows:
Reduce your dimensional weight: If you are using a box that is too big for your product, you are essentially giving money away
Shop for discounted shipping rates: Some companies offer discounts under certain conditions. Search these out as they can provide you with great savings
Decrease shipping distance: Using companies with fulfillment centers that are closer to your end destination can save on shipping zone costs
Enlist third-party shipping insurance: Insurance could be pricey, depending on the item being sent. Explore third-party insurance for these items
Prepay shipping from major carriers: Prepaying for services can allow for up to 20% savings on shipping costs!
Use discounted packing supplies: You can go bargain shopping with packing supplies such as cardboard, foam, paper, etc. to try to save money
Partner with 3PL: Handing off your shipping and handling to a third party can save a lot of money, time and space
What’s Next: Fulfillment with Mel
Now that you know what goes into calculating shipping costs, how can your business reduce shipping costs?
Sometimes the best solution is enlisting someone who has the professional expertise to handle this all for you. Partnering with Print Bind Ship is an ideal solution for all of your fulfillment needs and can ensure that your customers are happy, all at a low price.