Practical Ecommerce

Shipping and Fulfillment: How to Get the Best Bang for Your Buck

UPS, FedEx and the U.S. Postal Service all do a good job of getting orders to your customers, but there are some simple things you can do to lower the costs involved.

Understand How Delivery Costs Are Calculated

When you start shipping in volume it is vital to understand how each carrier bills for its services, including all the potential surcharges that may come into play. The starting point is to print and carefully read each carrier’s service guide. The downloadable, PDF versions of those guides are here:

The most common UPS and FedEx surcharges you will encounter are the fuel surcharge percentage, the residential delivery fee, the rural delivery surcharge, extra transit insurance fees, and the address correction fees. You can quickly learn more about rate shopping between carriers by reading my prior article, “Shipping Rates: Comparison Shopping Saves Money.”

Choose Daily Pickup Rates Or Counter Rates

UPS and FedEx have two different rate schedules that depend on if you sign a daily pickup contract or if you drop off your pre-labeled packages at a UPS Store or a FedEx Kinko’s outlet. The daily pickup rate is up to 30 percent lower than counter rates, but you are subject to a sliding scale of weekly pickup fees that runs from $520 to $1,040 per year, depending on your weekly ship volume.

Use USPS Flat Rate Boxes

Most U.S. Postal Service flat rate boxes work out to about two cents per cubic inch for all delivery zones no matter what the package weight may be. This means you may be able to cut shipping costs dramatically for high-density merchandise (small and heavy) compared to standard UPS, FedEx and Priority Mail shipping rates. The cost comparison process can be complicated, though, and I suggest you read my prior article, “Shipping Rates: Flat Rate Boxes Usually Save Money” for the details.

Partner with a Postal Consolidator

There are service providers that can add your First Class and Priority Mail parcels to thousands of others and bypass most of the U.S. Postal system to deliver them at lower cost; this service is available both domestically and internationally. It may add one or more days to the normal USPS delivery time, but the cost savings can be substantial. The USPS provides a list of shipping consolidators on its website.

Negotiate UPS, FedEx and USPS Discounts

The U.S. Postal Service offers Priority Mail discounts and reduced delivery confirmation fees if you process your packages electronically, and this is best done using a third party service, such as Stamps.com or Endicia.com. UPS and FedEx also offer volume discounts off their base rates, but this has to be negotiated with each carrier’s field representative, and you will need to invest in your own UPS WorldShip or FedEx Ship Manager shipping stations.

Use Free Shipping Supplies

All three carriers provide free packaging and shipping supplies that you can order online, at:

Hire An Outside Auditor

UPS and FedEx delivery and billing errors are sometimes hard to identify. But there are now independent service providers that will audit your account and collect compensation from UPS and FedEx on your behalf for a percentage of the savings. You can find a list of such companies by searching the term “parcel audit services” online.

Resize Your Shipping Cartons

You may be able to further cut shipping costs by stocking a broader range of carton sizes—small to large. The right size carton can reduce the billable ship weight, eliminate a DIM surcharge or allow you to consolidate several small parcels to one larger one. Please see my prior articles “How To Buy Shipping Supplies” and “Shipping: Dimensional Weight Errors Can Cost Big Bucks” to see how easy and profitable this could be.

Use Online Calculators

A simple way to rate shop between carriers is to use the online price calculators provided by FedEx, UPS and the U.S. Postal Service. In each case you enter your ship-from and ship-to zip codes, your residential or commercial classification, the package weight and package length, width and height dimensions and the online calculate instantly reports the total cost.

Outsource Fulfillment

Depending on the specifics of your online business, you may be able to further reduce costs by outsourcing your warehousing, shipping and return processing. To learn more, search the term “fulfillment services” online and read my prior article “Fulfillment: Guidelines for Outsourcing.”

Summary

With today’s tighter merchandise margins and emphasis on free delivery it is a good idea for online merchants to get the best bang for the buck for their product shipping and fulfillment expense.

John Lindberg

John Lindberg

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  1. tekgems December 6, 2010 Reply

    Residential surcharge this, Fuel Surcharge that. We dropped UPS like a bad habit. We use USPS Parcel Post now because we know exactly what we pay each time we ship it. You’d think with all their amazing software and shipping rates tables, they could tell you upfront exactly how much something will cost to ship that day, but after years of surprise charges, the greed is systematic and I will no longer be a part of it.

  2. John Lindberg December 6, 2010 Reply

    I really do understand how you feel…it seems sometimes like UPS and FedEx are going out of their way to make their pricing complicated.

    My next PeC article will be about a do-it-yourself pricing spreadsheet that I developed for my fulfillment clients and will include a free sample you will be able to download.

    It isn’t perfect because there will still be some odd-ball surcharges that kick-in under very unusual circumstances, but hopefully it will be the tool you need to project your UPS and FedEx delivery costs close enough to be able to use those carriers if you want to.

    There is some extra work to use UPS and FedEx, but for packages 3 pounds and over, the delivery cost savings can be big enough to justify the effort.

    John Lindberg – President
    EFULFILLMENT SERVICE INC