Shipping Cost #12

Shipping Cost

Shipping Merchandise.

Shipping is a major cost of being an online merchant. Expect shipping charges to range from 5% to 15% of your gross sales. You will need to learn about shipping cost, freight claims, proper packaging and the paper work required. The following is enough to get you started and point you in the correct direction to learn more.

UPS & Fed-X Ground & DHL

These companies deliver smaller parcels worldwide. We will cover here the brown truck company, but they are all similar in the services offered and the general methods of operation.

The company supplies the shipping labels. UPS pricing software is available at no charge. Package tracking is available from the company's web site. When you ship a package, you e-mail your customer with the tracking number and the customer can track their package delivery. The company will send or fax you a daily shipping report.

UPS charges a pick up fee (about $6.00 in addition to the shipping charges) or a per day fee if you want daily pick up. You can drop packages off at their specified locations and save the fee.

UPS is slow to pay damage or loss claims; on the other hand they have very few problems. Some customers do not like their practice of leaving packages out doors when the intended receiver is not home. We find few problems with these shippers and use them when ever possible.

UPS has gotten where they charge for everything they do and we think they have gone to far, we now ship mostly with DHL.

Truck Shipments

Truck shipments can be expensive. Rates are negotiable in advance. We save money by shopping the freight companies every 90 days. Expect to pay an additional fee for residential delivery ($35.00 usually). Expect to pay extra for lift gate services for heavy items. Expect to pay a lot more for in house delivery. You will be expected to pay freight bills within seven days.

Classification code, the shipping zone you are shipping to, and the weight of the shipment determines the freight company's freight rates. They get the rates from a freight rate book and discount from the book prices based on your annual shipping volume. Because of this, were ever possible, have the manufacture ship the products for you (drop shipping) using the manufactures earned discount rate. The manufacture then adds the shipping cost to your invoice. Your other choice is to have the manufacture ship on your account (called third party billing). Negotiate the discounts with the freight companys salesmen to include all shipments charged to your account, with out regard to the point of origin. The freight companies do not normally discount third party billings shipped from several different cities (manufactures), you will have to request it. Also, try to negotiate away the residential deliver fee, if you don't ask you can't get.

Your freight company salesmen will bring you a rate book and other information; take the time to read it. Following the procedures set forth for filling out freight claim forms and filling out the waybill of laden. Proper paper work can save you money or cost you money, fair warning.

Other services offered by freight companies include. Door to door full truck, rail car shipment pick up and delivery, warehousing etc. The service of interest to you is re-directed shipments. Re-direct is when you call the freight company to re-direct the shipment to another address. For example, a manufacture will not drop ship? solution: you have the items sent to you, then you call the freight company and redirect the load to the customer after the shipment has started. There is a fee for doing this.

To find freight companies use the phone book, the web and check the yellow pages. Discount freight service companies can be found on line. Freight quote is one example of a discounter.

NOTE: Shipments that cross water cost a lot more. Hawaii, Alaska, Martha's Vineyard and Puerto Rico are not domestic shipments. Shipments to Canada have a duty charge. Shipments to an APO have to be by U.S. Mail. If your choice of shipper does not have a freight terminal in a given city they will hand of the shipment off to another carrier and charge you more, check when you shipper that they will honor the quoted charges.

Drop Shipments

Drop shipping means the manufacture or supplier is shipping to your customers for you. It cost the manufacture more to be your shipper and you can expect to pay a fee for the service. Drop shipping is the best way for you as a retailer, because you get to take advantage of the shippers discounted freight rates, you do not have to handle the goods, you do not have to keep shipping supplies on hand and you save labor cost.

For those same reasons and the extra expense involved, some companies will not drop ship for you. Add to those reasons for not drop shipping the fact that freight claims and product returns have to be handled by the shipper and you can see why some companies do not drop ship. The shipper is also using his funds paying your shipping cost with out getting a profit on the extra money they have spent.

When you get a manufacture that will drop ship for you DO NOT mess it up with petty complaints and claims that are not their fault. DO NOT bug them for information about the shipments. Put the information on your web site about the estimated shipping times and tell your customers what to expect, to avoid information request problems.

Air Freight

Airfreight is expensive and your customers will pay extra for the service. Be sure you understand the carriers insurance claims rules. Some companies will not pay freight claims for damage or loss unless the items are crate-ed. Get a freight quote each time you ship by air and unless you have shipped by that carrier before ask them if there is anything else you need to be aware of?

U.S. Postal Service

The postal service is not user friendly. They charge less, but take more of your time in dealing with the paper work and going to the post office. The biggest problem when shipping by parcel post is no signature at delivery. Yes, you can request a signature and pay the extra fee. More paper work and more time at the post office. Your credit card company will need proof of delivery if your customer disputes the credit card charges or claims non-delivery of the product.

The post office domestic delivery rate is excellent. When do you ship by parcel post? When the package is small and low in value. When the customer requests it and does not mind having to go to the post office to sign for a package. When your time is not too valuable. If you are paying an employee by the hour, you cannot afford to ship by the U.S. post office, because when labor is added the package companies like DHL are less expensive.

Over seas shipments by the post office have a bad habit of disappearing. DO NOT ship by U.S. post office to foreign lands, unless your customer signs a disclaimer that says, delivery to the post office constitutes delivery to them and they, the customer assumes risk of loss.

Way Bill Of Laden

The waybill of laden is the shipping document that governs every thing that goes right or wrong with a shipment. Sit down with your freight company's salesperson or freight terminal manager to go over the correct way to fill out the paper work. Put down the wrong freight classification and you could pay more then need be. Make an address error and you may be paying to re-ship a shipment or a re-delivery fee. Fail to provide a customer phone number could delay the shipment. Be thorough and accurate and you will avoid problems and wasted expense.

Freight Claims

When a customer places an order and you send them a copy of their invoice, include instructions on how to receive the shipment and what to do if a problem arises. Remember that homeowners are not use to receiving shipments by truck lines; you have to let them know what to expect. See the letter or policies used by patiostore.com

Here are the highlights of it. The waybill must be noted at the time of delivery if any damage is noticed. If the boxes are damaged, inspect the order and or, note on the waybill of laden that " boxes damaged, possible concealed damage" and have the driver sign it. If this is not done the most that a freight company will pay is 33% of the claim amount. If the shipment is pre-paid freight the shipper files the claims. If the shipment is freight collect the receiver files the claim.

To avoid problems have a conversation with your freight companys salesperson about all aspects of shipping, remember the sales person does not know what you are aware of or not aware of. You have to ask.

Other Notes of Importance on damaged freight:Â

* Freight claims must be filed in a timely manner (seven days is timely).

* File the claim to include the freight on replacement items.

* Do not dispose of damaged items until advised to do so.

* Do not refuse a shipment that is damaged because the fright claim can not be made until the shipment lands somewhere again.

WarehousingÂ

There are warehousing services that will do your shipping for you. If your markup is high enough to afford the fees, this may be a good solution for you. Public warehouses charge for storage and for each service provided. They tend to do larger shipments that can be handled by forklift. There are also companies who specialize in being your warehouse and will provide full services as requested. A web search will quickly find this type of warehouse Service Company.

You might use this type company as a re-shipper when a manufacture will not drop ship for you. You have the warehouse pick up your orders and re-ship them to your customer.
One example of a full service logistics service company is Central States at www.cs-dist.com

Avoiding Problems

Crossing Water: Anytime a shipment crosses water on other then a bridge expect a large freight bill. For example shipments to Martha's Vineyard is not a normal shipment and it can cost more to go across the channel by boat, then across the country by truck.

Alaska & Hawaii: Normal freight rates do not apply, always charge your customer actual cost when shipping to these two states. Most shipments will go by air.

Canada: Same as Alaska and Hawaii with the addition of a duty or fee for the paper work.

Mexico: Best sent to a freight forwarding company and let the experts handle the shipment.

All Others: Ship via a freight forwarder to avoid problems and loss form an array of unforeseen events and hidden expenses.

Notify Customers of what to expect: That is the best way to avoid problems and refunds.

Upstairs - Down Stairs: Be sure the customer is aware that truck companies do curb side deliveries only. Most truck drivers are very nice and will deliver in to a garage or just inside the door. All other request, basement deliveries, up-stairs deliveries etc. are not included and can be very expensive to arrange. Most freight companies charge extra for lift gate service or any non drop and go services. When the customer wants more services, there usually are companies (in large cities) who do local deliveries that could pickup the shipment up at the freight company's terminal and provide the needed services.

Number One Problem: Improper receipt of a shipment making filing of a freight claim problematic.

Inbound Freight Cost Accounting

In bound freight charges are part of the cost of goods (not an expense). Add the inbound shipping cost to the items cost to get total cost of goods received. Mark up the total cost of goods to get the selling price.

For example: You buy an item for $100 and it cost $12 to get it to you, your cost is $112.00

Out Bound Freight Cost Accounting

Out bound freight cost on a profit and loss statement is an expense item or a cost of goods item. Shipping cost charged to a customer is shipping income. For example, you sell an item for $200 and charge the customer 5% shipping and the actual cost of shipping is $22.00

Your shipping income will show $10 shipping income ($200 x 5% = $10) your shipping cost will show the full $22.00 for a net cost of shipping of $12.00. The profit on the sale will be reduced by the $12 not collected from the customer.

Due Diligence.

Due diligence is a term that means to do your home work or to educate yourself as to the pertinent facts. If you want to keep shipping cost in line, you will need to do the following.

* Re-shop freight rates every six months with different carriers.
* Instruct your personal on the proper methods of doing the paperwork.
* Review freight claims every month.
* Review freight bills every month looking for any potential problems.

I instruct my bill paying department to let me see any freight bill that is higher then the normal percentage of freight cost compared to the sales price, or any bill that looks high. If we get a freight estimate before we ship, we compare the actual freight bill to the estimate for any extra charges and billing errors.

When you find a problem or potential problem, type up a memo on your solution to the problem and lay it on the corner of your desk for two days. If after two days, you still think that your solution is a good one, then act. The reason for this delay is that shipping is a large expense that requires thoughtful action and not quick seat of the pants solutions. For example, lets say you sold an item and found out later that all the profit went to freight. Your first inclination will be to raise the price of the item. If you do that you could kill the sales. The high freight cost could be an error, it could be that it shipped by truck when UPS would do, it could be that the item went from coast to coast and that on most orders that is not the case. The point is, do your homework before you make a change that impacts your future business.