Your company’s shipping costs are among the critical expenses you must track. They can eat into your profit margins if not monitored. The delivery cost to your client also determines whether your customer will buy from you again.
In today’s cutthroat marketplace, you must create the perfect balance in your operations. One way to do this is by taking time to compute your shipping expenses. A clear idea of your shipping expenses helps you know how to lower the costs.
For example, you may want to switch partners when it comes to shipping containers. You may be looking into more affordable solutions, like Royal Wolf. By making your operations cost efficient, you’ll also be more likely to retain your existing clients.
You need some basic information before you send your goods to your clients worldwide. Continue reading to learn about the factors to consider when computing your shipping costs.
Package Weight and Dimensions
The weight of the package is one of the basic factors determining the shipping cost. After weighing the package, a shipping courier will use the weight details to determine how much you need to pay. Usually, you’ll pay more if the parcel you’re sending is bulkier.
Established shipping couriers use the dimensional (DIM) weight to determine a package’s weight. They calculate this by multiplying the package’s length, width, and height to get its total cubic size. The answer is then divided by a particular rate depending on the shipping courier. For instance, the standard DIM divisor for UPS is 139.
The DIM weight is a great approach when calculating the weight of light parcels that take up too much space in the truck or shipping containers. Other shipping couriers allow you to determine your shipping expense depending on volume. Such an approach is cheaper if you’re dealing with a heavy parcel with a small volume.
When computing the parcel cost by weight, don’t only consider the product’s weight. Factor in the weight of the extra packaging material, such as shredded paper, bubble wrap, and cardboard. These extra materials can increase your package’s weight, which further raises your shipping cost.
Shipping Point of Origin and Destination
The distance between the point of origin and the destination also determines the shipping cost. Generally, you’ll pay more when shipping a parcel for a longer distance. For instance, sending a parcel from New York to California will cost you less than sending one to another country, such as Australia. Domestic shipping is obviously cheaper than global shipping.
In the United States, couriers use shipping zones to calculate the total cost. These zones measure the distance between the parcel’s point of origin and destination. Here’s a breakdown of the eight recognized shipping zones in the United States:
- Zone 1: 0 to 50 miles
- Zone 2: 51 to 150 miles
- Zone 3: 151 to 300 miles
- Zone 4: 301 to 600 miles
- Zone 5: 601 to 1,000 miles
- Zone 6: 1,001 to 1,400 miles
- Zone 7: 1,401 to 1,800 miles
- Zone 8: 1,801 miles or more
- Value Of Shipped Contents
The value of the items in your package also affects the total shipping cost. You’ll need to pay a greater shipping cost when shipping items that need greater care, such as jewelry. With shipping insurance for such commodities, the courier will reimburse you if the parcel gets lost or destroyed.
Although shipping insurance is expensive, paying the extra money is advised. Doing so safeguards your business from a bigger financial loss if anything happens to the package. After all, the cost of shipping insurance is lower than the item’s actual value. It can sometimes be as low as 3% of the total shipping value, making it quite worthwhile.
Take time to compare the shipping insurance cost offered by different couriers. You want to get the best deal possible to lower your total shipping costs.
Shipping Delivery Times
Moreover, shipping cost depends on how fast you want your parcel to reach its destination. The faster you want the package to reach the intended person, the more you’ll need to spend. Such a logic means a one-day service will cost more than the standard period of three to seven days.
The greater cost of faster delivery is often because the courier needs to use a more expensive transport method. For example, the courier can opt for air shipping which is faster than ground shipping.
You need to consider the extra cost of faster delivery before making any promises to your customers. Otherwise, you’ll spend more on your shipping expenses, which can negatively affect your company’s bottom line.
You need to know the things that affect your shipping cost before you even use your calculator. Otherwise, the entire process of computing your shipping expenses can feel overwhelming.
With this guide, it doesn’t have to reach such a point. Detailed above are tips that can help determine the shipping costs. With these insights, calculating your shipping expenses will no longer feel like rocket science. You can make an informed decision as to what type of shipping you can offer to your customers: calculated shipping, flat-rate shipping, or free shipping.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.