Shipping costs have become a growing concern for business owners in recent times. Whether you are sourcing supplies internationally or sending out orders to your customers, you’ve likely noticed a steady increase in your shipping expenses. In this guide, we will delve into the reasons behind the rising shipping costs and provide you with valuable insights on how to manage and reduce these expenses effectively.
Understanding the Surge in Shipping Costs:
Business owners, especially those in the realm of eCommerce, are closely monitoring the escalating shipping expenses. But what is causing this significant surge in shipping costs? While global issues contribute to this trend, logistics experts primarily attribute it to the following factors:
Shipping Container Shortage:
The onset of the Covid-19 lockdowns led to a sharp drop in container demand, causing manufacturers to scale back production.
As demand rebounded, manufacturers struggled to keep up, resulting in hefty surcharges on available containers.
Increased Consumer Demand:
During the pandemic lockdowns, consumer demand for various products, from furniture to clothing, surged dramatically.
This spike in demand led to higher shipping volumes, which were not met with a corresponding increase in transportation resources, thus driving up shipping costs.
Oil Price Rises:
Due to plummeting oil demand during Covid-19 lockdowns and geopolitical tensions, oil prices soared, consistently surpassing $100 per barrel.
Couriers and shipping companies now grapple with higher fuel costs, which are being transferred to customers through increased shipping rates.
Before we explore strategies to mitigate shipping expenses, let’s clarify the concept of “shipping costs.” Shipping encompasses the entire process of preparing, packaging, and delivering an order to a customer. The mode of transportation depends on your chosen courier or shipping service, which can range from road transport (vans or lorries) to rail or, for international shipments, container ships or airplanes. Consequently, shipping costs encompass various expenses, including labour, packaging materials, inventory storage, and transport and delivery costs.
Factors Affecting Shipping Costs:
Shipping costs are calculated by different shipping companies in various ways, typically involving the following variables:
Heavier items incur higher shipping costs.
Some companies apply dimensional weight calculations, factoring in both weight and dimensions of the package.
Dimensional weight accounts for a package’s size and shape in addition to its weight.
Shipping companies may charge based on either weight or dimensional weight, depending on which is higher.
Shipping costs vary based on the destination, with local shipments costing less than international ones.
Shipping companies often use shipping zones to determine rates, considering the origin and destination of the package.
Value of Contents:
High-value items may increase shipping costs due to the need for insurance.
Expedited shipping options come with higher rates, as they require more costly transportation methods like air freight.
Strategies to Reduce Shipping Costs:
While numerous variables impact shipping expenses, there are effective ways to minimize them:
Weigh Your Packages:
Regularly weigh your packages to avoid overpaying for excessively heavy items.
Check Packaging Dimensions:
Optimize packaging dimensions to reduce wasted space and save on shipping costs.
Use SIOC Packaging:
Consider using “ships in own container” (SIOC) packaging for products with sturdy boxes, eliminating the need for additional packaging.
Purchase Packaging in Bulk:
Buy boxes and packing materials in bulk to secure cost savings.
Partner with a third-party logistics provider (Abeo Logistics) to benefit from their negotiation power and secure cheaper shipping rates.
As shipping costs continue to rise, it’s crucial for businesses to adapt and implement cost-saving strategies. By carefully managing package dimensions, using efficient packaging, and exploring third-party logistics options, you can effectively control and reduce your shipping expenses, ultimately improving your bottom line.