Price Factors that Determine Parcel Shipping Rates

As anyone in the freight industry knows, shipping rates vary widely. Though predicting your next shipping costs may seem impossible, you can at least keep yourself informed of factors that may cause your price to fluctuate or increase. Before you pay through the nose again, consider these influencing circumstances.

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What Variables Affect Shipping Rates?

Understanding the variables affecting different shipping rates can help you choose those parts of your parcel pricing contract that can save you money if negotiated effectively. As you prepare your next small parcel negotiation, keep these factors in mind:

  1. Service levels
  2. Shipment weight, shape, and size (dims)
  3. Zonality
  4. Fuel Surcharges
  5. Accessorial Fees

1) Service Levels

Simply put, a service level refers to how quickly your package will ship and how much extra service or care you’re paying for. Depending on how important your shipment is, this charge could increase pretty quickly. Pay attention to how much priority shipping will cost you! It may not always be worth it, in many cases, the ground network can get to your inner zone almost as quickly. You should also be aware that the carriers can entice you with large discounts on service levels you don’t really use that often and sometimes your lowest discounts are in the service levels you use the most.

Pro Tip: If your business has an account with a parcel shipping service, you’re probably charged service fees for your package. Make sure to ask about this potential expense.

2) Shipment Weight, Shape, and Size

Weight is a standard consideration for shipping cost calculation. However, don’t forget that the size and shape of your package will influence your final cost as well! The bigger or more oddly shaped your shipment is, the fewer orders can be packed near it, and the less money the shipping service stands to make. Thus, you’ll often end up paying more. More importantly, you will be charged the greater of the two…actual weight vs. dim weight. The dim divisor that is utilized to calculate your dimensions is a negotiable item in your carrier contract and is often overlooked. Both FedEx and UPS also offer package optimization services in order to make sure you are maximizing the density of your shipments, there are also other independent 3rd Party package optimizations services providers in the market you can reach out to as well.  

3) Zoning Prices

Unfortunately, you’ll likely never come across a flat rate for shipping packages across the US. Though the exact borders may vary, most shipping services divide the country into zones. Your starting zone and the package’s destination will both factor into the ultimate price you’ll pay. Sending a package from the east to the west coast? Prepare for a relatively high shipping rate.

4) Fuel Surcharges

The most common surcharge you’ll encounter is a fuel surcharge. This one is pretty straightforward–it just covers the cost of the gas or jet fuel required to get your package to its destination. Just remember that as gas prices rise and fall this will affect your total shipping cost. FedEx and UPS both have their own fuel surcharges, for a larger shipper you may be able to negotiate a discount on your fuel surcharges as well. Also, your fuel is a percentage of the transportation rate and as you improve your discount here this will also lower the amount you pay in fuel surcharges.

5) Additional Shipping Fees

Depending on which service you use, you could have to pay between one to 80 different additional fees to ship your package. These costs may be negotiable and you should focus on the ones that have the greatest impact on overall carrier spend. Don’t let yourself get caught off guard with these additional costs, know those accessorial fees you are being charged for most frequently and work to negotiate some form of concession(s).

Saving Money on Parcel Shipping

When it comes to sending packages around the country, your options for saving money are somewhat limited. However, you can still take steps to reduce your costs. Keep the package weight low if you can help it, minimize your package size when you can, monitor price changes, and ask about potential discounts or unnecessary fees. If you monitor your package activity carefully, you can cut costs for your business.
Interested in learning more on parcel shipping rates? Join the conversation to see how other people save money on their shipping.