Understanding Carrier Costs
Most carriers operate a delivery program based on fixed rates coupled with various surcharges. The fixed rates are typically based on two factors; weight and distance.
- Weight – The USPS and hybrid carriers typically have two weight scales, one for under a pound and once for a pound and up. Under a pound, or lightweight parcels, are rounded up to the next ounce increment for the rate, and parcels over a pound are rounded up to the next pound increment. For example, a 1.1-pound parcel and a 1.9-pound parcel would both round up to 2 pounds for rating purposes.
- Distance – typically categorized as zones, this is a representation of the distance a parcel will travel until it is delivered. Shorter distances are a lower zone, and therefore less expensive than higher zoned packages that travel further.
In addition to these base rate costs, other surcharges may apply. Here are a few of the more common surcharges:
- Fuel – a variable surcharge based on a market or similar index.
- Delivery Area and Extended Delivery Area surcharges – some carriers assess these for packages going to zip codes that are less densely populated.
- Residential – Some carriers add a residential surcharge for non-commercial deliveries.
- Saturday Delivery – some carriers assess a Saturday delivery surcharge for services that do not typically deliver on Saturday.
Another factor to note is Dimensional Weight. Many carriers have a dimensional weight divisor which can impact the cost. A standard divisor is 139, and dimensional weight is calculated by taking the product of LxWxH and dividing it by the divisor. You are then charged the higher of either the dimensional weight or actual weight. For example, a 2 lb parcel that measures 12x12x12 would ship as 13 lbs because (12x12x12)/139 = 12.43, which rounds up to 13!
It’s easy to see how size impacts cost, but another way to possibly save on costs is by looking at cusp weights. For example, if you have a standard offering that ships with a weight of 3.1 lbs (charged 4 lbs), is it possible to alter the packaging to pull it under the 3 lb cusp?