When it comes to shipping, there always seems to be one question we as business owners ask first — how much will it cost?
It only makes sense that you’d want to know how your bottom line is affected, so of course price matters! And like any discerning business owner, you’re going to want to know how your carrier has arrived at your quote to make sure you’re getting a fair deal.
But how do you know how to calculate the shipping cost?
There are several factors that affect shipping costs, as well as various other costs associated with different modes of transport, and in this post, we’re going to break them down for you. That way, you can be sure you understand how to calculate the shipping cost for your freight.
How to Calculate Shipping Rates
When it comes to how to calculate shipping prices, you’re likely going to want to know an exact figure.
Who wouldn’t? It’s helpful for customer pricing, as well as calculating profit margin.
The thing is, each parcel, container, and pallet is unique and individual. Its specific characteristics will impact pricing, and so before you get into how to calculate shipping rates, you need to know more about the freight quote process.
Factors Affecting Shipping Prices
Like a snowflake, one kind of freight can be totally unique and different from the next.
Sometimes, even the same items being shipped can have different pricing simply because they are bound for different locations, or need a faster shipping speed, or any other number of reasons.
Those reasons, or things that make each package unique, are factors that affect shipping prices.
Often, these are the things that your carrier will ask you about for your specific freight. You can think of it kind of like a menu, where what you order will affect your bill (or in this case, quote).
Sometimes, you want the three-course special with all of the extras, and other times, you only want an appetizer.
The same goes for shipping. Sometimes you need a full container shipped internationally, and other times, you need a small parcel sent regionally.
That’s why the factors affecting shipping prices are so important to understand. You don’t want to end up overpromising and underdelivering to your team or customers, so let’s get into what those factors are next.
Package dimensions and weight
Like weighing produce and dry goods at the grocery store, or baggage at the airport, how much you have to ship will affect the shipping price due to its size and weight.
The more you need to send, the more you will need to pay for shipping in simplest terms.
For example, if you were to ship a few small parcels to your e-commerce business’ customers, you would be charged a very different price than someone sending a shipping container full of goods because it takes more space, time, and effort to handle such a large package.
The weight and dimensions of your shipment are particularly important when it comes to LTL, or less than truckload, shipping due to something called freight density and class.
This simple calculation helps tell transportation companies what your shipment can be sent along with, and how it should be handled, as well as how dense it is. This helps them decide how to class, or sort, your shipment and charge you appropriately. A transportation company like Moto will help you classify your shipment into the appropriate freight class when you set up your order, but if you want to get a rough estimate, you can always use a freight density calculator.
As with almost anything in life, much of how much you pay for something is related to who is setting the price.
Think of it as shopping for a car. You can buy a brand new car or a used vehicle, a truck or sedan, a sports car or minivan — you get the picture. It is all about what your family’s needs are, as well as where you live, and your budget. The same goes for shipping prices.
You could need a local or regional carrier to drop parcels for you on a regular basis, or a one-time, transatlantic shipment in a large sea container. Plus, some companies may specialize in specific shipping lanes and offer more competitive pricing than other carriers not focused on the area you are shipping to or from. Regardless, you’d likely want to find a freight company that is an expert in what your needs are, and has the stats to back up their claims, too.
That way, your carrier is well versed in matching the best mode for your shipment’s needs and can help you economize, too!
Aside from dimensions and carrier choice, where your package is going is one of the most important factors in determining shipping prices.
Put in easiest terms, the farther that your shipment has to travel from its origin to destination, the more you will pay for shipping.
In order to know how far your package has to travel to reach its destination, you will need to know:
- Origin address
- Destination address
If your destination requires your shipment to travel across various modes of transportation and over borders, you may want to consider using freight forwarding services. These kinds of extra service offerings can help make sure your shipment gets to its destination in a timely manner at the right price for your business.
Sometimes, you send a shipment, and end up feeling like you are trying to hunt its location down like you’re in some sort of spy movie.
It shouldn’t feel impossible to know where your shipments are. It is essential to your business’ operation, after all!
One thing that will factor into the price, however, is that some providers may charge for extra tracking or not offer it at all. Others, like Moto, will give you easy-to-understand daily tracking updates sent to your email or accessible online through our tracking request portal. No matter what your needs are, you should always ask about tracking capabilities when you request a quote.
Customs and duties
When you are sending your shipments across one or more international borders, you can understand how things can get complicated quickly.
As you might expect, complications can equate to dollars in the case of transportation. When a shipment must enter a new country, and undergo customs clearance, there can be duties (or fees) associated with importing or exporting through that country. Not to mention additional fees you can face for having your shipments incorrectly labeled and packaged.
In order to get the best idea of what customs clearance may entail for your specific shipment, you’re going to need to get in contact with your transportation provider to ensure you know what to expect at the border. You can also ask about working with a customs broker to help you navigate the process even more smoothly, so you don’t have to worry about the ins and outs of each country you ship to, or through.
The thing that puts the ‘mode’ in the mode of transportation is how your shipment needs to travel to get to its destination.
Common modes of transportation for shipments can include:
- Boats or ships
Whether or not you will need one or more of these modes will depend on where your shipment is headed and what is geographically between the origin and destination.
For example, you may need air and sea transportation for international shipments, which is going to be more expensive than truckload shipping regionally.
By adding multiple modes of transportation, especially if they are more expensive like airplane transportation, the shipping price you will be given will likely increase.
In summary, everything that affects shipping costs should be clearly outlined and explained by your transportation provider. That way, you know you are getting the best value for your money possible, and your shipment will arrive damage-free and on time.
The factors outlined above can be found, summarized, in the table below.
Effect on Shipping Price
Package Dimensions and Weight
The larger and heavier your package is, the more costly it will be to ship.
The size, location, and experience of a carrier can affect the shipping price.
The further your freight must travel, the more expensive it will be, generally.
The scope of tracking you require can make things more expensive or maybe an extra fee for some shipments.
Customs and Duties
Additional services for customs brokerage and duties can add to your shipping quote.
Certain modes of transport (like trucking) are more affordable than others, and a combination of one or more modes may be more costly.
Understanding Flat Rate Shipping
With everything we covered on the factors affecting shipping prices, you may be searching for a one-size-fits-all price.
We wouldn’t blame you for that, after all, for businesses offering to ship to customers, it is particularly important to offer low-priced, predictable shipping prices. Especially in a marketplace where almost a quarter of consumers shopping online expect free shipping with their orders.
So how do you find consistent pricing and make predicting profits more simple? The answer may be flat rate shipping.
When it comes to understanding how to calculate shipping price, it can be challenging to estimate from shipment to shipment. That is why some businesses use flat rate shipping.
The flat rate comes from one, singular price charged for a shipment based on a set of requirements that come from the carrier. They can set dimensional and weight requirements, and charge a fixed fee for shipping within those requirements.
These flat rates can be for shipments as small as a parcel (such as a flat rate shipping box you pick up in bulk for your business) or as large as a full truckload shipment.
In the case of full truckload shipments, you are charged one flat fee by the carrier. This is opposite to a less than truckload shipment that will need to have its rate calculated based on the amount of space it occupies in a truck, and what can share the load alongside it.
How to Calculate Flat Rate Shipping
You might think it would be an oxymoron to ask how to calculate flat-rate shipping since it’s a flat rate and all, but there’s more to it than that.
FTL shipping still requires you to know what you’re shipping and where in order for you to give your carrier the most accurate information for the shipping quote, especially if it is going to be crossing international borders.
When you’re using transportation services like flat rate shipping, you’ll need to provide to the shipper:
- Your business’ name and information
- Your customer or recipient name and information
- Shipment date
- Number of pallets, parcels, containers, or units
- Type of packaging units are in
- Description of goods (including dangerous goods classifications and freight class)
- Value of goods
By ensuring you know all that goes into how to calculate flat rate shipping, you can be better prepared next time you pick up the phone or request this convenient service for your business’ shipments.
How to Calculate International Shipping
For many organizations, shipping beyond regional and international borders is a part of doing business. Whether it is importing raw materials from other countries in order to make a product at home, or exporting finished products to customers and businesses in other countries, you need to know how to calculate international shipping.
But what exactly is international shipping defined as?
In logistics and supply chain management, international shipping is defined as the process of importing and exporting goods through other countries by various modes of transportation.
Speaking of definitions, there is actually a defined process for international shipping that each shipment or freight will go through, as outlined in the table below.
Freight is collected from its shipper and transported to the facility from where it will depart for the border.
Export Customs Clearance
Once the freight has reached the border, it must undergo outgoing customs clearance. Various paperwork, such as declaration forms, certificates of origin, and dangerous goods documentation. It must be cleared for export before proceeding any further.
This is when the freight will be physically traveling to its destination. Usually, this is by air or ocean for international orders, but freight can move by truck or train internationally as well.
Import Customs Clearance
Once the freight arrives at its destination country’s border, it must now pass import customs clearance. It must adhere to that specific country’s import rules. Ensuring proper documentation and preparation of the shipment is key to success at this stage.
Final transportation from the facility at the border to its destination warehouse or customer address.
By learning the process of international shipping, you can better understand how to calculate international shipping because you’ll know what exactly goes into the transportation process.
Here are a few tips to keep in mind when you’re wondering how to calculate international shipping properly for your business:
- Connect with a professional like a freight forwarding company and customs broker to ensure your shipments are prepared properly for their destination and avoid fees, or worse, rejection at the border.
- Learn about the basic terms and vocabulary associated with international shipping so you know what your responsibilities are as a shipper and understand the common jargon thrown around by transportation companies.
- Stay up to date with news and updates in the international shipping community so you don’t miss key policy changes or rule modifications.
How to Calculate Shipping Costs Small Business
Online shopping is one of the most popular ways for consumers to get goods in their hands in today’s world.
Small businesses around the world have long realized the power of connecting to customers around the globe online through e-commerce channels, but with 41% of consumers reporting doing half of all of their shopping online this year, it’s an option you can’t afford to ignore.
But in order to get products to customers, you have to ship it to them. You also likely need to ship raw materials or other items to your business to make your products available in the first place. Not to mention how much shipping can hurt your wallet more if it’s not done right.
That can seem like a lot to handle for a small business, especially for solopreneurs or microbusinesses with few staff and resources. So it’s no surprise that 58% of sellers and businesses say shipping costs are their biggest challenge in today’s marketplace.
In order to be efficient, economical, and help boost your business’ profits, you’ll need to keep shipping costs low and easy to understand. This is why a lot of small e-commerce merchants rely on flat rate shipping for predictable and consistent shipping prices.
But if flat rate shipping doesn’t work for you, or isn’t the best choice based on your location, how do you know how to calculate shipping costs as a small business?
Well, in order to save money, you first need to know what factors make up the cost of shipping for small businesses.
Typically, those factors are:
- Cost of packaging materials and supplies
- Dimensional weight (similar to freight density)
- Carrier choice
- Service type and speed
You could see how easily your costs could rise if one or more of these aspects suddenly increased or changed. For example, if you have been using one kind of box or envelope that is under a predetermined size to keep costs low, and that becomes unavailable, you would have not only a potential increase in packaging costs, but the dimensional weight will increase likely as well.
Another thing to consider is that offering free shipping is often a great draw for customers shopping online, but if they don’t fill their baskets up, it may not be worth it for you to offer them free shipping. For instance, if they spent $50, and your profit was $30 off of that order, but you have to spend $25 for shipping, you wouldn’t exactly make much of a profit on the order. That’s why it’s important to know exactly what your costs are before offering free shipping services to customers.
But what else can you do to control costs and keep your customers happy at the same time?
We have a few tips for you that can help get your small business shipping costs under control:
- Know your shipping lingo and what all goes into shipping before getting started. Reviewing information (like this!) will help make sure you know what you’re getting into.
- Determine your packaging, labour, and carrier fees so you can get an idea of what your profit will be on each order.
- Create a relationship with a transportation provider who can help you not only with parcel delivery but logistics management as your business grows.
- Determine if you will need other services like late pick-up or delivery by checking out the accessorial pricing schedule from your transportation provider.
- Write a shipping policy and FAQ on your website so you can set expectations from the start on shipping times and fees.
Now it’s time to kick-start your engines and get moving with all of the information you need to not only know how to calculate shipping costs but to optimize and economize shipping for your business.
Whether you are a small e-commerce company sending a few parcels a day or a large business in need of full freight forwarding services and full truckload shipping, Moto is your go-to lean, mean shipping machine ready to help you go past finding shipping prices and help you reach business goals.
We’d love to help you grow your business and take the stress out of shipping — just give us a call or get in touch and we’d be happy to assist!