Start with production costs, which include all incurred overhead costs, materials, labor costs, and incidentals, to figure out this cost. After that, you add your profit margin and the cost of shipping from the warehouse to the client's location to get the landed price per unit.
Give customers the finest from every service, including delivery, particularly when they shop online. However, you cannot continue to offer a low-cost delivery service without putting your finances in danger. Therefore, it is preferable to track down the most precise freight logistics costs in order to prevent revenue loss.
But how can you figure out the cost of shipping each item? Divide the total shipping expense by the average inventory amount to get the shipping cost per item. However, a number of factors, like the item's weight, shipment location, and delivery time, affect the freight charges.
This article includes a comprehensive instruction on how to calculate shipping costs per item accurately and what considerations to make. Go on reading.
How is Shipping Cost Calculated?
A simple formula exists for determining the shipping cost of your items:
Total shipping cost / Average inventory value = shipping cost per item.
How to Estimate Shipping Costs?
You can estimate the freight cost calculation by a number of factors. These are-
- Package Dimensions
Almost all shipping carriers use this technique to find out the shipping cost. It indicates the parcel's shape and size. You can find out the dimension by multiplying the length, width, and height of the package and diving with a standard divisor. The shipping charge is imposed on which's greater- the actual weight of the item of the package itself.
- Package Weight
It indicates the actual weight of the product, not the packaging. As mentioned above, the shipping cost will be imposed on the heavier one between the item and the packaging.
- Delivery Destination
Obviously, the greater the distance the parcel has to traverse more will be the shipping price. Usually, the delivery areas are divided into several zones. So, when postage crosses a zone, the costs increase accordingly.
- High-value Products
Expensive or extremely fragile products require additional layers of packaging and may even need insurance. The extra protection and insurance cost adds to the shipping rate.
- Delivery Time
Customers want their orders to be delivered in the shortest time possible. Unfortunately, if you've got only one warehouse, fast shipping becomes difficult and expensive. Even with several shipping warehouses, maintaining quick deliveries to distant destinations can take a lot of work.
- Unpredicted Problems
Things don't always go to plan. Unexpected incidents like losing items during transit, misplacing an order, labeling wrong information, and delayed delivery due to adverse weather are pretty common and entirely out of your control. So, it's essential to make the shipping budget with a provision for such unpredictable events.
So, depending on all these factors, the shipping cost per item can go up or down.
How to reduce shipping costs for small businesses?
You can reduce shipping costs by selecting the cheapest delivery service. Instead of subscribing to a third party just for branded packaging, use your own. Moreover, you can opt for the most affordable delivery rates provided by the courier company, although it'll increase the delivery time.
How much should be charged for shipping?
There's no straightforward answer to the question, as the weight, value, and delivery location of all products aren't the same. However, a general approach for setting shipping fees is to add all of your monthly delivery costs and divide them by the number of packages delivered. It should give you an estimation of what you should charge.
What happens if an item is damaged during shipping?
If a customer's package is lost or damaged during shipping, usually, it's the company's responsibility to provide a full or partial refund, depending on the severity of the damage.
Final Words
You can determine the most accurate shipping costs by analyzing your previous months' data. But if you're just starting out, go for the standard shipping rates and change the price accordingly after a few months.
Hopefully, the methods mentioned in the article for how to calculate shipping cost per item and how different factors influence it will come in handy.
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