Shipping Costs for Businesses: Painful Lessons & Surprises

[Ivan Seeking]

I know we have a few other business owners out there. Have you been suprised by shipping costs for your business? When I first started doing some resale as a function of my consulting business, I was constantly underestimating shipping costs - esp when I had to order next day [UPS red]. Cripes, what would normally cost eight or ten dollars can cost as much as fifty for shipping. And it is often all but impossible to know the cost of shipping when placing the order. This is especially true of online orders. In my case, I have to submit a PO request before ordering, which makes it even tougher.

This was a painful learning curve for me and recently other business people have mentioned having the same problem. One poor guy purchased something very heavy and ordered it next day. He had budgeted something like $30-$40 to cover a $200+ shipping charge! When you only take !5-25% markup, this can kill your profit in a hurry.

 

[Stengah]

Yes I have been troubled by high shipping charges as well. Specifically the ridiculous insurance costs of UPS. We pay them to ship, which is usually affordable, but then we have to pay them again in case THEY lose the packages.

 

[Adyssa]

Priority services are rudely expensive, but it's expensive work getting parcels interstate, or international in a day or two. Regular freight prices are pretty reasonable I think, but obviously you have to wait maybe a few days, or weeks depending on where the two parties are.

Most freight companies supply dispatch software that will calculate shipping costs at the rates you are given if you are using them on a slightly more than just here and there basis. I used to work logistics for a wholesale company, and while we did get stung with some really ugly ones, they were due to extreme necessity or a mistake. Multiple pallets of air-freight is very expensive!

 

[Jimmy Snyder]

I bought a Rolex watch for $20 which as you know is a very good price. However, S&H brought that up an additional $35. Then when the watch came, it was a fake. I don't know how a slip-up like that can happen. Anyway no problem right? There was a money back guarantee. That's when I found out they only return the $20, not the $35. Even so, I asked for the price of the watch back. That was 3 years ago so I expect the check will arrive very soon now.

 

[arildno]

When I have ordered books from amazon or abebooks, I try to do it in bulk, so that the shipping cost pr. item does not get absurdly high.
If I order, say, 6-10 books at a time, I can live with the cost of shipping (or air mail or whatever)

 

[Ivan Seeking]

Yes I have been troubled by high shipping charges as well. Specifically the ridiculous insurance costs of UPS. We pay them to ship, which is usually affordable, but then we have to pay them again in case THEY lose the packages.

I was referring to the cost of purchases, but you're right, the insurance can be ridiculously expensive when you're the shipper. What is it for UPS... I think a dollar for every $100 over $500? I have even started weighing the value of my time for shipping something like a $10k processor. There are times when I can essentially make $100 an hour if I deliver it myself!

 

[Ivan Seeking]

Priority services are rudely expensive, but it's expensive work getting parcels interstate, or international in a day or two. Regular freight prices are pretty reasonable I think, but obviously you have to wait maybe a few days, or weeks depending on where the two parties are.

Most freight companies supply dispatch software that will calculate shipping costs at the rates you are given if you are using them on a slightly more than just here and there basis. I used to work logistics for a wholesale company, and while we did get stung with some really ugly ones, they were due to extreme necessity or a mistake. Multiple pallets of air-freight is very expensive!

I don't remember clearly what it cost anymore, but once I had to order a small sensor from Japan, counter-to-counter, next day. I think the shipping charge was around $1000.

I must say that UPS does a fantastic job. I'm a huge fan. But when I can use regular freight I sure see the difference. For example, I just had to order a 10KVA transformer [~950 Lbs] from California for delivery to the Seattle area. Shipping was PREPAID by the seller! Wow! It will probably take three weeks to get there, but to ship something like this UPS would cost a small fortune [I don't know if UPS even does stuff that heavy for any price].

 

[Ivan Seeking]

Oh yes, UPS heavy freight kicks in at 70 Lbs. I don't think they cite a limit for their heavy freight division.

 

[dlgoff]

In my last job, we had both FedEx and UPS shipping heavy freight (~1Klb/shipment daily). And since both knew they were competing, we would periodically switch depending on the lowest cost.

 

[missclass]

It is very expensive at times even when you are the one doing the shipping. My company just did a freight audit to find that we were losing tons of money with our logistic choices.

 

[StevieTNZ]

Ah, if you buy a Rolex for $20, of course it is going to be a fake.

What bothers me is how slow shipping is from the US to NZ, for purchases from Amazon. If I order from AmazonUK, if I spend over 25 pounds its free, and it arrives within a week (and that's standard shipping!) compared to standard speed for AmazonUS which is like a month.

 

[turbo]

Most of my shipping in consulting-work consisted of manuals and systems descriptions. I managed to wean my long-term clients off paper and onto magnetic media, which saved a lot of money. I had some pretty tight deadlines at times and used FedEx to meet those.

I had found out the hard way that USPS Next-Day Delivery is rarely, if ever, next-day. A representative of my longest-standing client lived in Tucker, GA, which is in the east part of Atlanta, home to Hartsfield airport and probably the biggest mail-transfer site east of the Mississippi. I'd overnight packages of materials to him (very expensive) and they never arrived on time. I complained about the constant late deliveries to the local postmaster, only to find out that Next-Day Delivery only happens sporadically in a very small sub-set of Zip codes. That's when Larry the FedEx guy and I became regular pals.

 

[DoggerDan]

The companies I worked for were recipients, not shippers. Still, high shipping costs can easily turn a profitable venture into a net drain.

We had some pretty smart fellows in purchasing and finance who worked to minimize shipping costs and factor in inventory holding costs. However, it was up to us in operations to give them enough lead time so they weren't backed into a corner. Also, there were items we did need as well as items we might need. When delays cost buku bucks, the likelihood of whether or not we needed an item, its cost, and the shipping time were weighed against the cost of delays on the project to determine if it was something we should have on hand or not.

Lot's of decisions were based on probability, such as when a welding unit failed. We always had a backup, but we'd have to determine whether we needed to rush order a replacement. To answer that, we had to determine the probability of the backup failing before the replacement would arrive, and turn that figure over to the finance guys who'd crunch the numbers and determine whether it would financially better to rush the order or use cheaper shipping options.