“9 Factors That Affect Shipping Rates
If your business involves inventory – whether you’re a wholesaler, manufacturer or retailer – shipping is one of the key costs of doing business. Shipping costs are often highly uncertain; merchants may not know how much the shipment will cost until the carrier issues an invoice a few weeks later. Although shipping rates are often indeterminate, they are not a complete mystery. Like most expenditures, they depend on a range of economic circumstances. Let’s see how to define shipping costs
Shipping is the price of certain goods being shipped from one location to another. The price depends on the form of the goods, the mode of transport (truck, ship, train, plane), the weight of the goods and the distance to the delivery destination. Many shipping services, especially air carriers, use dimensional weight to calculate prices, which takes into account both the weight and volume of the cargo.
1. Fuel cost
All types of courier services rely on fuel to get your package from point A to point B. That’s why increases and volatility in fuel prices can be the number one factor affecting freight rates.
Once fuel prices drop, the cost of operating planes, container ships and trucks will drop. This will ultimately minimize shipping costs. Conversely, increased fuel costs mean higher transportation costs.
2. The weight and density of the cargo
Weight and density affect freight class, which in turn affects freight costs. The larger and denser the package, the more space is required for shipping. Whether it’s land, air or sea, the more space and labor required to transport your goods, the more you pay. To keep costs down, make sure to use high-quality, lightweight packaging and work with the shipper of your choice. Shippers who provide superior customer service and efficiency to their shipping partners typically receive higher rates and recurring business opportunities from the carrier.
3. Distance
The origin and destination of the goods can also affect shipping costs.
If you ship by sea, please note that different disembarkation ports charge different rates. When sending goods internationally by air, you should be informed that exchange rates between different countries may result in different shipping costs.
It’s also important to know that the further a package travels to its intended delivery point, the more expensive it will be to ship. For example, it is much cheaper to ship goods across the country than to ship them abroad.
4. Freight demand
Pricing depends on the number of products the carrier ships, just as it depends on the actual underlying cost. If capacity is limited, operators may be inclined to sell the limited space at a premium. On the other hand, if business is slow, carriers may be persuaded to offer more competitive prices, at least in the short term.
5. Customer Loyalty
Merchants who can provide regular, consistent business to their carriers can easily get good prices, especially when demand is low across the industry.
6. Season
Seasonal trends have a huge impact on freight costs. Higher requirements bring higher costs. When shipping becomes a priority, rates naturally increase. To avoid overrunning your shipping budget, supply chain companies must forecast data from previous years as accurately as possible. Building a relationship with your freight provider or using a trusted 3PL to manage shipping rates will help maintain your budget when the market fluctuates.
7. Customs and duties
When you service and ship packages to international customers on a regular basis, you face many strict customs regulations. This requires you to pay additional fees that vary by country.
Consumers often incur these additional shipping costs, which may come as a surprise to them. However, as a business owner, it is important to include this type of information in your shipping policy. You should correctly explain that these hidden costs are beyond your control and you will not earn commissions from them.
8. Geopolitical events
In addition to tariffs and duties, international shipping costs can also be affected by a range of geopolitical events.
For example, businesses that primarily use ocean shipping have been suffering huge losses from global piracy. With growing concerns about pirates and rogue governments, couriers are forced to travel longer routes and pay expensive insurance premiums. This ultimately leads to high shipping costs.
9. Your reputation as a businessman
The carrier’s quotation will reflect, at least in part, the carrier’s expectations for pallet packing and loading times. If you are known for fast loading, you may be charged slightly less to compensate.”
