How to Calculate Shipping Costs for Small Businesses
For a small or medium business owner, controlling shipping costs is vital for profitability. However, unpredictable supply and demand make cost predictability challenging. To evaluate shipping costs in advance, consider these factors:
Package weight and dimensions
Most carriers use dimensional weight (DIM) to determine shipping rates. It takes into account the volume of shipped freight in less-than container load (LCL), thus, also called “volumetric weight”.
Freight costs are determined based on the actual weight or volumetric weight, whichever is greater. Sometimes, the charged weight may be higher than the actual weight — because of a higher dimensional weight.
Type of shipping carrier and services
Different carriers have different shipping rates that vary with transit times, service type, destination, etc. Unless you have special requirements (such as handling high-value goods or fragile items in the container), you should be able to get standard rates from the available carriers upfront. Shop around to see what fits your budget the best.
📌 Does negotiating back and forth on shipping rates seem daunting? Twill gives you instant freight shipping rates to make cost prediction easier.
Other significant factors
Numerous aspects affect the final figure when calculating small business shipping costs. These include packaging, insurance, fees and surcharges, and special license requirements. But those are only specific to the type of goods and container you are shipping. Prices increase further as shipping zones go up.
4 Tips to Reduce Your Small Business Shipping Costs
Now that you know what factors affect the shipping charges in your small business, here are some cost-saving shipping tips you can follow to maximize profits:
1. Offer multiple shipping options
As a small e-commerce business, give your customers multiple shipping options to meet their needs and increase customer satisfaction. These can include options for standard shipping, expedited shipping, and even free shipping for orders over a certain amount. You can adjust the added shipping costs in the sale price or charge overheads for custom options.
2. Optimize your freight packaging
LCL often gets shipped in extra-large boxes or with improper packaging, prone to transit damage and losses. It also increases your freight’s dimensional weight, thus, amping up shipping charges.
Proper packaging can efficiently reduce your logistics and transportation costs. So, choose packaging that is the right size and weight for your products. Add lightweight cushioning and tapes/ties for extra protection. Use labels for giving handling instructions to the carriers.
3. Ship full-container loads (FCL)
Consolidate your shipments whenever possible and send full-container loads (FCL). Due to a small volume, you often have to pay higher shipping rates when you ship less-than container loads (LCL). Sending FCL gives you more negotiating power on shipping rates and are comparatively cheaper. Plus, it reduces the time and resources required for packing and processing individual orders.
4. Use shipping software
Freight management or shipping software can automate the shipping process, saving you time and reducing the risk of errors. Look for software that supports your online platform and preferred carriers. Better yet, go with an integrated platform for all your shipping requirements that offers multiple service options in one place, like Twill.
Twill helps you track and trace service for your shipments up to 9 key milestones. So, you are always up-to-date on the status of your containers and can manage your freight efficiently.
How to Compare Different Service Options for Small Business Shipping
When you’re a small business, choosing the right logistics partners and service options is vital for saving shipping costs. Here are a few questions you can consider:
How much do you want to spend on shipping & logistics?
When you’re just starting, resources are limited and prioritizing is important. Although shipping is the backbone of your business, it’s always wise to cap your spending. Your shipping budget greatly determines what options are most feasible for you.
Go with carriers and logistics partners that offer maximum cost visibility. Remember, the cheapest isn’t always the best.
Where do you want to ship your products?
Are you shipping locally or going global? Do you ship to remote locations? Do you plan to expand geographically? Consider these things when looking at service options. Your shipping destination will help you decide what logistics providers to pick (local or international) and what transport to choose (ocean, air, inland, or multimodal).
In Twill, you can simply choose to ship containers from A to B and we arrange everything for you — which means ocean, rail, and inland are part of the transportation journey — giving you the most cost-efficient method of freight shipping.
What can your customers expect?
Small businesses need to have a customer-first outlook to sustain growth. Find out what your customers expect in terms of shipping and delivery.
Are they happy with standard delivery time at low cost? Or are they willing to opt for faster delivery options at added charges? How often do they want to get updates on their shipment? Do they want special packaging options (such as gift wraps)? — Answers to such questions will give you more clarity on what type of shipping options will be best for you.
Depending on your customers’ preferences and business needs, choose a freight service provider that falls within your shipping budget.
Do you have any special shipping requirements?
Many factors come into play when selecting a carrier and deciding freight costs. Does your cargo need special handling? Do you need insurance for your goods? Do you require someone to take care of customs clearance for you? Try to find partners that can accommodate such special service requirements for different processes while shipping.
Here are a few common shipping services that can get added:
Ocean Shipping: preferable for cost-effective small businesses shipping globally.
Inland Transportation: preferable for small businesses looking to optimize transport costs; also works as an extended arm for ocean freight shipping for small businesses.
Freight Logistics Management: for small businesses who want end-to-end control over their supply chain; integrates key aspects like freight booking & risk management.
Customs Clearance: for businesses who require external expert assistance on customs paperwork, filing, and clearance procedures.
Shipment Tracking: for businesses who want to maintain supply chain visibility and offer better customer service.
Consider what solutions you require as a small business and choose a shipping partner that can provide the highest quality services at the best freight rates.
Cost-Effective Solutions for Small Business Shipping
With these small business shipping tips and strategies, you can ship your freight easily and take your business to the next level. Stay ahead of the competition and keep your customers satisfied with fast, affordable, and reliable shipping.
Twill is the perfect shipping partner for your small business. Get instant quotes, multiple service options, real-time shipment visibility, flexible payment options, loading guarantee, and a dedicated support team. Start shipping with Twill today!
Small Business Shipping: Frequently Asked Questions (FAQs)
1. What is the cheapest way to ship for a small business?
As a small business, you can ship by ocean, air, road, or rail. While shipping via ocean is the most cost-effective method, businesses also go for multimodal transportation (like sea & road, rail & road, etc.) to save costs.
2. How do I calculate shipping costs?
To calculate shipping costs, consider whether you’re shipping full container load (FCL) or less-than container load (LCL). Other factors that impact costs include shipping zones, destination, desired delivery speed, and other add-on services required.
3. How can you manage shipping costs as a small business?
Small businesses can manage shipping costs by optimizing packaging, negotiating with carriers, consolidating their freight, and using shipping software to identify cost-saving opportunities.
4. What shipping should I use for my small business?
Ocean shipping is the most preferred and cost-friendly method if you're looking to save costs. Consider a digital provider (like Twill) that offers streamlined shipping solutions to automate your logistics workflow, optimize costs, and enhance customer experience.