With the ecommerce industry booming and competition increasing every day, customers have increased expectations about the online shopping experience and the order fulfillment process.
Of course, platforms like Amazon set the bar for both ecommerce merchants and couriers alike with their impressive overnight and 2-day shipping policies. For small businesses, pulling off quick delivery times can put a lot of pressure on your logistics operations. Unless you have a network of fulfillment centers and a big labor force, fulfilling orders to get delivered in a cost-effective manner is going to be tough.
So, how can you manage shipping costs to profitably ship orders and not lose sales to major brands? This article will take you through the basics of shipping costs and how you can correctly estimate them through different factors and tools.
How to calculate shipping costs
The total shipping costs depend on the basic information of the package that you’re shipping and on the declared value of the products inside. However, the total cost often depends on many other complex factors as well. Here are a few factors that contribute to the shipping rates that popular courier services offer.
The package dimensions, such as length, width, and height, are usually multiplied together to calculate the dimensional or volumetric weight of the package. The size of the package usually determines the shipping rate per cubic foot and different box sizes are marked with different shipping costs.
If the actual weight of the package outweighs the dimensional weight calculated from the standard formula, then the actual weight of the package is used as the billable weight and the shipping costs are based on that. Thus, the larger the package is, the higher its shipping costs.
Additionally, the shipping costs depend on the destination country and the destination zip codes. For some zones, the shipping costs are usually higher. Like in the United States, shipments to Hawaii and Alaska are often more expensive than in the continental states. The total costs depend on the zone distance which is calculated by counting the shipping zones between the point of origin and the destination.
Value of contents shipped
Often, packages with a high declared value require shipping insurance. This is also true for expensive products and dangerous goods that require their own packaging to be shipped in that isn’t standard. The parcel handling-related charges add to the shipping-related charges, resulting in higher shipping costs in total.
Expected delivery time
For most couriers, premium and fast shipping get more expensive the more zone distance there is to cover. For example, overnight shipping in the same zone might not be as expensive as overnight shipping to some destinations five zones away, as that would probably require air shipment for fast shipping. The standard post delivery to the same destination might cost less but it would take longer for it to be shipped.
Shipping cost calculators for shipping carriers
The above-mentioned factors are usually what popular shippers use to estimate shipping costs. Many ecommerce platforms have their own shipping calculator, like the Shopify shipping calculator that gives instant shipping quotes for a package. Let’s take a look at some of the carriers.
USPS shipping rates and shipping calculator
USPS is among the cheapest carriers in the USA, especially for ground shipping. The post office sends daily rounds for shipments and this is the reason that USPS offers fast deliveries at such modest rates, making it one of the best deals out there.
USPS offers a variety of deals based on the mail classes like priority mail, flat-rate shipping with envelopes and different boxes, etc.
You can use the USPS Shipping calculator to get shipping quotes from the courier on domestic/APO/FPO and international shipping.
FedEx pricing and shipping calculator
FedEx is another popular carrier service in the US and Canada. FedEx offers a variety of delivery deals ranging from same day to overnight shipping, and from ground to air shipment.
The FedEx Small Business program offers shipping solutions to small businesses and the rewards program offers shipping discounts. FedEx shipping costs are based on the dimensional weight of the packages.
You can check the FedEx shipping cost calculator on their website to estimate shipment charges.
UPS pricing and shipping calculator
UPS is another popular courier service in the United States. UPS shipment ranges from the UPS ground to UPS 3-Day Select or 2nd Day Air. UPS prices, like that of FedEx, are also based on the dimensional weight of packages. Small businesses can often cash in on some shipping discounts through the UPS Connect program, which apply to both ground and air shipments.
The UPS shipping calculator can be found on their website.
Shipping cost calculation FAQs
By now, we’ve covered the basics of shipping charges and how they are calculated. In case you still have some questions about shipping cost calculation, here are some of the most frequently asked questions, answered.
How do I calculate dimensional weight?
The dimensional or dim weight is calculated by measuring the dimensions of the package and then dividing the total volume by a standard dim divisor. Popular shipping carriers like USPS, FedEx, UPS, and DHL, etc. base their shipping rates on the dimensional weight of the package.
Can I ship flat rate?
Yes, USPS has many offers for flat rate shipping where you can ship by putting your products in the standard flat-rate envelopes or the flat rate boxes in sizes small, medium, and large.
How do I calculate shipping costs for USPS?
Shipping costs on USPS can be easily calculated through the shipping calculator available on their website. You can use the drop-down menu available on the website to estimate the shipping cost of the different shipping label deals offered by USPS.
How do I get shipping discounts?
Usually, third-party logistics companies have set deals with shipping carriers like USPS, UPS, and FedEx, etc. By using the services of a 3PL provider, you can often get shipping discounts through these couriers. Just sort out these details with your fulfillment provider.
Which is the cheapest carrier to ship with?
One of the cheapest carriers is the United States Postal Service or the USPS for short. Comparing the average shipping costs for FedEx, USPS, and UPS, it is clear the USPS is the cheapest option for both ground and air shipments. USPS also offers many shipping services like the Retail Ground, Priority Mail 2-Day, and Priority Mail Express, etc. The actual shipping quotes are present on the USPS website.
How 3PLs reduce shipping costs
By teaming up with third-party logistics companies (3PLs) for logistics and warehouse management services, small businesses can enjoy major savings on shipping costs. So, how exactly can you save on shipping costs by outsourcing your fulfillment, you ask? Let’s take a look!
Discounted shipping rates
Because 3PL companies manage order fulfillment for several clients and handle plenty of daily shipments, they often have agreements for discounted rates with carriers. This way, they can offer their clients discounted shipping rates as well. Most 3PLs don’t charge extra fees for the discounts, so you can rest assured that you won’t be charged extra for shipping with a 3PL.
Because of distributed inventory, ecommerce business owners can have inventory stored at different warehouses in different shipping zones. This makes fast shipping easier as the inventory can be sourced from the closest warehouse upon the placement of the order and the extra fuel charges can be avoided. Basically, orders will be sent to the warehouse closest to the customer to improve delivery speeds and reduce transportation costs.
2-day delivery and overnight delivery
Additionally, these fulfillment companies are often able to offer overnight and 2-day delivery options, thanks to the above-mentioned factors. This helps small businesses compete with Amazon and other large brands that have the fulfillment network capable of delivering orders quickly.
Shipping costs not only depend on the product you’re sending and where you’re sending it from, but also on where and how fast the goods are being sent. Additionally, the total costs also depend on what carrier you are partnering up with. The good thing is that these things can often be estimated to great accuracy with the help of internet tools.
To sum things up, shipping costs, while they seem simple enough, involve a lot of complex factors in their overall calculation, and you should definitely keep them in mind.
Get started with ShipHero’s fulfillment services to reduce shipping costs.