Setting your shipping and handling fees too high or too low can wreck your ecommerce business model. If you charge too much, your cart abandonment rate can skyrocket. If you charge too little, your profit margins can quickly disappear.
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For most online merchants, cost of goods sold and operating costs are fairly easy to capture. But shipping and fulfillment costs are sometimes difficult to determine, by comparison. One way to handle this problem is to reduce the complexity of shipping and handling to a single spreadsheet that captures everything you need to know.
- It is an additional cost applied by shipping lines due to risk of war to compensate extra costs to bear. FCL: per-container LCL: per-w/m Import/Export All countries LWR: LOW WATER SURCHARGE: It is an additional cost applied by the Port of Montreal due to low water levels in the St.
- A pricing term indication that the cost of the goods and freight charges are included in the quoted price. Container Freight Station. A carrier facility where Less Than Container load shipments are consolidated or unloaded. Cost, Insurance and Freight. A term of trading in which the buyer of the goods pay for the cost of.
- Maximize freight contribution. We illustrate this slot allocation model with a case study of a Taiwan liner shipping company and the results show the applicability and better performances than the previous allocation used in practice. Introduction Since liner shipping is a capital-intensive industry, the liner companies must invest.
Determine Current Rates, Volume
First, gather the facts about your current shipping costs.
Some shipping companies include an assumption for this cost category into operating expenses. But as this is a provision rather than a cash item it is recommended to keep periodic maintenance expenses separately from operating costs.
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- Determine current shipping rates. To begin, you will need (a) the current USPS rate chart for USPS shipments, (b) the UPS daily pick-up rate chart if you have a UPS or FedEx contract, or (c ) the UPS retail rate chart if you drop off your parcels at a UPS or FedEx store. Note that the published daily pick-up UPS and FedEx base rates and surcharge rates are the same. There are some minor differences in the retail rates (sometimes called counter rates) that are charged by UPS stores and FedEx Kinkos.
- Determine surcharge rates. These are typically the USPS delivery confirmation fees, UPS and FedEx residential and delivery area surcharges and the UPS and FedEx fuel surcharge.
- Estimate surcharge volume. This is the percentage of your UPS and FedEx parcels that are subject to the residential surcharge and to the delivery area surcharge. You will also need to estimate the percentage of your USPS parcels that include the delivery confirmation option.
- Determine your per-order warehouse and supplies expense. To do this, add your monthly warehouse labor cost, shipping supplies expense, and facility cost (excluding USPS, UPS or FedEx delivery costs) and divide this by your average monthly shipping volume. For example, if your total warehouse and supplies is $4,250 per month and you ship 1,000 orders per month, the per order cost equals $4.25.
Per-Order Costs
Then, calculate your average, per-order shipping and handling costs.
The example spreadsheet, below, includes current USPS and UPS base rates and surcharges rates, all based on shipping weights. I have assumed $4.25 per order for warehouse and supplies expense and have entered a starting set of surcharge usage factors, such as 90 percent of all UPS parcels are subject to the residential delivery surcharge. When a rate calls for a zone designation, I have used Zone 5, which is about the average amount compared to the entire Zone 2 to Zone 8 cost range. You can easily change these assumptions to match the facts of your unique shipping and handling situation.
Screen capture, Shipping and Handling spreadsheet, partial view.
With this simple model, you can project your actual shipping and handling cost for each package weight as well as rate-shop between carriers and delivery methods. For example, based on these assumptions, USPS Priority Mail is the lower-cost choice for a 2-pound parcel, but UPS is the lower-cost solution for a 5-pound package. But, changes in surcharge fees or your mix of surcharge usage rates can have a big impact on relative costs.
Compare Sales Amounts to Shipping, Handling Costs
Next, compare your individual sales totals to their corresponding shipping and handling costs. Since you now know your shipping and handling costs by package weight, simply compare a representative sample of your per-order sales totals to their individual package weights and associated real shipping and handling costs.
For example, if the sale was $93.00 (excluding shipping, handling, and taxes) and the shipment was a 4-pound parcel sent via UPS Ground daily pick up rate, you can see from the example spreadsheet that the projected shipping and handling cost would be $13.75 or about 15 percent of net revenue. You can use this method to quickly create a summary of your typical sale totals and associated ship weights and costs.
From this, you can develop your unique shipping and handling fee strategy including the potential for free delivery and with confidence that your order fulfillment fee structure is based on facts. You can use the same system to compare your in-house order fulfillment costs with outsourced fulfillment quotations.
Summary
Setting your online shipping and handling fees too high or too low can be a serious mistake. But, it really isn't that difficult to create a shipping-and-handling cost model based on package shipping weights, and to then link order sales totals to their corresponding shipping and handling costs. This is a simple way to ensure your shipping and handling fees are based on facts, and not just guesses.
Similar to most industries, there are terms used in freight shipping that might befuddle those without experience or prior knowledge to industry terminology. While the list is long, there are a handful of freight shipping terms that seem to be asked again and again.
In this post, we will break down 13 of the most common shipping terms and definitions. Let's get started:
Slot Cost Shipping Definition Us History
1. What is inbound freight?
Inbound freight is the term used to define a shipment that comes from a vendor to a business or facility, like a warehouse.
2. What is outbound freight?
On the flip side, outbound freight describes shipments that leave warehouses or other facilities.
3. What is LTL freight?
Less than truckload, or LTL, is a freight mode for shipments larger than parcel or small package but short of the space required of a full truckload shipment. The freight is typically moved by common carrier.
Slot Cost Shipping Definition Economics
4. What is flatbed hauling?
Flatbed hauling is commonly associated with shipping heavy or unique shaped freight that is too large for conventional trucks. It also applies to freight that requires open sides for accessibility when loading and unloading the freight.
5. What does BOL stand for in shipping?
BOL stands for bill of lading, which is the document that typically serves as a contract between the shipper and carrier. In this document, all aspects of the freight shipment (what is being shipped, to whom and more) are carefully described. Learn more about BOL
6. What is a PRO number in shipping?
The PRO number is assigned by carriers once a shipment has been picked up to help shippers track the progress of their freight. This is known as the standard tracking number in the freight shipping industry.
7. Who is a carrier in shipping?
Any company or individual that transports freight for a fee is considered a carrier. Freightquote works with the most experienced carriers in the industry to transport your cargo safely. Learn where to get a free quote.
8. What is bulk freight?
Freight is typically contained within packages or containers during the shipping process. Many types of freight, particularly certain raw materials, commodities or goods that are not packaged are referred to as bulk freight.
9. What is a blind shipment?
A shipment where the shipper and receiver remain anonymous to one another, or the actual origin or destination of the shipment is masked, is a blind shipment.
10. What is a back haul in freight shipping?
The return trip of a truck transporting cargo or freight is generally referred to a back haul. It may be a return to the origin of the freight hauled in which the carrier is willing to offer a discount to secure freight for the trip.
11. What is cartage?
Cartage is the term used to describe freight that ships to and from a location within the same city or area.
12. What is full truckload shipping?
- Determine current shipping rates. To begin, you will need (a) the current USPS rate chart for USPS shipments, (b) the UPS daily pick-up rate chart if you have a UPS or FedEx contract, or (c ) the UPS retail rate chart if you drop off your parcels at a UPS or FedEx store. Note that the published daily pick-up UPS and FedEx base rates and surcharge rates are the same. There are some minor differences in the retail rates (sometimes called counter rates) that are charged by UPS stores and FedEx Kinkos.
- Determine surcharge rates. These are typically the USPS delivery confirmation fees, UPS and FedEx residential and delivery area surcharges and the UPS and FedEx fuel surcharge.
- Estimate surcharge volume. This is the percentage of your UPS and FedEx parcels that are subject to the residential surcharge and to the delivery area surcharge. You will also need to estimate the percentage of your USPS parcels that include the delivery confirmation option.
- Determine your per-order warehouse and supplies expense. To do this, add your monthly warehouse labor cost, shipping supplies expense, and facility cost (excluding USPS, UPS or FedEx delivery costs) and divide this by your average monthly shipping volume. For example, if your total warehouse and supplies is $4,250 per month and you ship 1,000 orders per month, the per order cost equals $4.25.
Per-Order Costs
Then, calculate your average, per-order shipping and handling costs.
The example spreadsheet, below, includes current USPS and UPS base rates and surcharges rates, all based on shipping weights. I have assumed $4.25 per order for warehouse and supplies expense and have entered a starting set of surcharge usage factors, such as 90 percent of all UPS parcels are subject to the residential delivery surcharge. When a rate calls for a zone designation, I have used Zone 5, which is about the average amount compared to the entire Zone 2 to Zone 8 cost range. You can easily change these assumptions to match the facts of your unique shipping and handling situation.
Screen capture, Shipping and Handling spreadsheet, partial view.
With this simple model, you can project your actual shipping and handling cost for each package weight as well as rate-shop between carriers and delivery methods. For example, based on these assumptions, USPS Priority Mail is the lower-cost choice for a 2-pound parcel, but UPS is the lower-cost solution for a 5-pound package. But, changes in surcharge fees or your mix of surcharge usage rates can have a big impact on relative costs.
Compare Sales Amounts to Shipping, Handling Costs
Next, compare your individual sales totals to their corresponding shipping and handling costs. Since you now know your shipping and handling costs by package weight, simply compare a representative sample of your per-order sales totals to their individual package weights and associated real shipping and handling costs.
For example, if the sale was $93.00 (excluding shipping, handling, and taxes) and the shipment was a 4-pound parcel sent via UPS Ground daily pick up rate, you can see from the example spreadsheet that the projected shipping and handling cost would be $13.75 or about 15 percent of net revenue. You can use this method to quickly create a summary of your typical sale totals and associated ship weights and costs.
From this, you can develop your unique shipping and handling fee strategy including the potential for free delivery and with confidence that your order fulfillment fee structure is based on facts. You can use the same system to compare your in-house order fulfillment costs with outsourced fulfillment quotations.
Summary
Setting your online shipping and handling fees too high or too low can be a serious mistake. But, it really isn't that difficult to create a shipping-and-handling cost model based on package shipping weights, and to then link order sales totals to their corresponding shipping and handling costs. This is a simple way to ensure your shipping and handling fees are based on facts, and not just guesses.
Similar to most industries, there are terms used in freight shipping that might befuddle those without experience or prior knowledge to industry terminology. While the list is long, there are a handful of freight shipping terms that seem to be asked again and again.
In this post, we will break down 13 of the most common shipping terms and definitions. Let's get started:
Slot Cost Shipping Definition Us History
1. What is inbound freight?
Inbound freight is the term used to define a shipment that comes from a vendor to a business or facility, like a warehouse.
2. What is outbound freight?
On the flip side, outbound freight describes shipments that leave warehouses or other facilities.
3. What is LTL freight?
Less than truckload, or LTL, is a freight mode for shipments larger than parcel or small package but short of the space required of a full truckload shipment. The freight is typically moved by common carrier.
Slot Cost Shipping Definition Economics
4. What is flatbed hauling?
Flatbed hauling is commonly associated with shipping heavy or unique shaped freight that is too large for conventional trucks. It also applies to freight that requires open sides for accessibility when loading and unloading the freight.
5. What does BOL stand for in shipping?
BOL stands for bill of lading, which is the document that typically serves as a contract between the shipper and carrier. In this document, all aspects of the freight shipment (what is being shipped, to whom and more) are carefully described. Learn more about BOL
6. What is a PRO number in shipping?
The PRO number is assigned by carriers once a shipment has been picked up to help shippers track the progress of their freight. This is known as the standard tracking number in the freight shipping industry.
7. Who is a carrier in shipping?
Any company or individual that transports freight for a fee is considered a carrier. Freightquote works with the most experienced carriers in the industry to transport your cargo safely. Learn where to get a free quote.
8. What is bulk freight?
Freight is typically contained within packages or containers during the shipping process. Many types of freight, particularly certain raw materials, commodities or goods that are not packaged are referred to as bulk freight.
9. What is a blind shipment?
A shipment where the shipper and receiver remain anonymous to one another, or the actual origin or destination of the shipment is masked, is a blind shipment.
10. What is a back haul in freight shipping?
The return trip of a truck transporting cargo or freight is generally referred to a back haul. It may be a return to the origin of the freight hauled in which the carrier is willing to offer a discount to secure freight for the trip.
11. What is cartage?
Cartage is the term used to describe freight that ships to and from a location within the same city or area.
12. What is full truckload shipping?
Full truckload shipping is for shippers that have enough cargo to fill an entire trailer. Full truckload shipping is typically faster than less than truckload shipping because the freight is only going to one destination. Learn more about full truckload shipping.
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13. What is intermodal transportation?
Intermodal transportation is when two or more modes of transportation will be carrying your freight from pick up all the way to delivery. Intermodal methods of transportation typically refer to the use of a train, boat, plane, or truck shipping. Learn more about intermodal transportation.
For a more in depth look into the most common freight shipping terms and definitions, check out our freight shipping terminology page. We do our best to answer all of your freight shipping questions and provide you with the information you need to make informed decisions about your chosen carrier.
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