Management & Finance

Shipping Rates: Comparison Shopping Saves Money

Miscalculating your shipping rates can cost you some big bucks. No matter your shipping volume, it is a good idea to comparison shop between package carriers and the various carrier-shipping options.

For example, a package weighing less than one pound shipped via U.S. Postal Service Priority Mail, with delivery confirmation and shipping box included, is currently $5.65. But a 6 ounce package sent via First-Class mail, including delivery confirmation, is only $2.87 per order plus $.20 for a purchased mailer. The difference is $2.58 per package, a 46 percent savings. After a thousand packages, that works out to a whopping $2,580 of pure profit.

Use the Online Calculators

An easy way to save on shipping is to use the online delivery cost calculators provided by FedEx, UPS and the U.S. Postal Service . In each case you will enter your ship-from and ship-to zip code, residential or commercial classification, package weight, and package length, width and height dimensions.

In the case of FedEx and UPS, you will be asked if you have daily pick-up service or if you will drop off the package at a local retail location. The pick-up rates are cheaper, but there is a fee that runs from $468 per year to $936 per year, depending on your shipping volume.

The package dimensions are used to calculate the package density in terms of pounds per cubic foot, and if the density is too low, the pricing system will substitute a “DIM” weight (dimensional weight) for the actual weight. There are also a number of surcharges that may be added, such as:

  • Residential delivery surcharge. Currently $2.05 for both FedEx and UPS ground delivery;
  • Fuel surcharge percentage. Currently 2.75 percent for FedEx and UPS ground (but the rate changes month to month);
  • Delivery area surcharge. FedEx and UPS currently charge $2.40 for delivery to certain rural residential zip codes;
  • Delivery confirmation. U.S. Postal Service charges $.80 for First Class, $.70 for Priority Mail; and
  • Insurance. U.S. Postal Service charges $2.25 for about the same coverage as provided free by FedEx and UPS.

Create a Spreadsheet

The online calculators work great if you have only a few package specifications to research, but if your shipping options are more complicated, you can quickly build your own rate shopping spreadsheet. Here is an excerpt from a simplified rate-shopping spreadsheet that I created.

You can download the entire chart plus supporting detail by clicking here. This chart is based on residential ground delivery at retail rates and includes postal delivery confirmations, but you can easily customize your spreadsheet for as many variables as you wish.

All the current rates and surcharge rules are available online as printed PDF service guides for each carrier, including the FedEx service guide the UPS guide and the U.S. Postal Service guide. If you prefer, you can order printed service guides from each of the shippers to avoid the PDF printing process on your own.

To make the decision process easier, try using just the zone 5 rates, as this is a good average for all the delivery zones. It is also a good idea to keep samples of the U.S. Postal Service’s small, medium and large flat rate boxes to test per-order size limitations as you go along. Plus, you need to measure the length, width and height of each of your standard ship cartons in case a DIM calculated weight applies. Additionally, U.S. Postal Service’s media rates are included in the spreadsheet, but keep in mind these rates can be used only for books and electronic media such as CDs and DVDs.

For each carrier, enter the current zone 5 base rates before surcharges for the ship weights you are calculating. Then enter the surcharge rates that will apply to your packages as explained by the service guides, and use cell formulas to add the surcharges as necessary. The big unknown in the rate shopping process is if the package contents will fit in a U.S. Postal Service flat rate box, and, if it does, will the flat rate actually save you money or not. The only way to be sure is to test pack the order and find out.

Summary

Whether you ship one order a day or a thousand orders, it pays to keep researching your rates and surcharges frequently. Doing so could save you thousands of dollars in the long run.

John Lindberg

John Lindberg

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