Determining Average Shipping Costs by Provider
The first and most vital step in analyzing the performance of a dealership’s shipping practice is to determine the average cost to ship a package. This article establishes the situational guidelines for choosing among these three top carriers—United Parcel Service (UPS), United States Postal Service (USPS), and Federal Express (FedEx).
United Parcel Service-UPS
When establishing the average cost to ship a package via UPS one must consider various sources of total cost: The cost to ship a package, adjustments and/or additional fees, service charges, and shipping supplies fees. This list establishes the total calculations for each component of the total shipping costs.
UPS charges a $0.72 supply fee per package. This charge means that if you ship 100 boxes via UPS, you will be billed $72.00 in addition to the actual cost to ship those packages. UPS also charges a weekly service charge. The other aspects of UPS’s billing costs require further, more complex calculations:
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | $0.72 per box |
| Service Charges | $11.00 per week* |
| Billing Adj./Add. Fees | ??? |
| Cost of Shipment | ??? |
Errors or misjudgments in the dimensions, or weight of a package can result in a re-measurement or reweighing of that package by UPS. If UPS finds an error, they will adjust your bill. We found that UPS increased the cost of each package by $1.90.
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | $0.72 per box |
| Service Charges | $11.00 per week* |
| Billing Adj./Add. Fees | $1.90 per box |
| Cost of Shipment | ??? |
Now that all the additional costs are determined, we had to average the actual cost of shipment. Our dealerships used UPS for medium to large sized items for east coast customers (these decisions will be explained later) and found that they were spending on average $12.26 per box they shipped. When we looked at these averages on a weekly basis, we found that packages shipped were in-between $11.00-$14.00 per box. With all supply costs, service charges, fees, adjustments, and shipment costs in place, we found that the total average to ship a box was $14.97.
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | $0.72 per box |
| Service Charges | $11.00 per week* |
| Billing Adj./Add. Fees | $1.90 per box |
| Cost of Shipment | $12.26 per box |
United States Postal Service-USPS
Determining an average cost to ship via USPS is much simpler than UPS. USPS flat rate boxes are available for free with no service charges, adjustments, or external fees. You pay USPS a flat rate for each box you’d like to send and only pay for additional services as you see fit. USPS has options, such as insurance and package tracking that can contribute to an additional cost (although these costs are often minimal). USPS also offers discounted pricing and package pick-ups when getting in contact with local small business postal workers. This action allows for lower costs.
The dealerships we used for our calculations shipped with USPS using flat rate boxes and occasionally west coast packages that were scheduled to take longer to ship through UPS. Because there are no additional fees, or charges associated with flat rate boxes, we had to add the receipts from USPS from one month from these dealerships and divide by the number of boxes that were shipped. We determined that these dealerships were able to ship using USPS at an average of $5.63 per box.
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | Free Flat Rate Boxes |
| Service Charges | $0.00 |
| Billing Adj./Add. Fees | $0.00 |
| Cost of Shipment | $5.63 per box |
The dealerships used to determine the average cost to ship a box via FedEx did not feature the same detailed information that was provided in our UPS calculations. Although FedEx offers free shipping supplies, the company also has multiple extra fees and adjustments that adds on to a users’ bills.
Some fees we found were the “Additional Handling Surcharge”. Another fee would be the $12.00 per package “Address Correction” charge that tacks on extra costs when FedEx has to figure out what address to deliver to because of an incorrect shipping label. However, this 11 page document features some fees that are important to take note of as unusual or unavoidable, such as the “Courier Pickup Charge” or the “Delivery Area Surcharge” that applies an extra charge to shipments to “select U.S. Zip Codes”. These fees also include a “Print Return Label” charge per box and “Fuel Surcharge”.
Unfortunately, we did not have the details to determine how these additional fees affect the base price for shipping a box via FedEx, but we did have monthly receipt totals for FedEx customers and the number of packages shipped. This information allowed us to calculate an average cost per box of $13.31 after the addition of fees and surcharges.
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | Free Boxes and Envelopes |
| Service Charges | Incl. in Cost of Shipment |
| Billing Adj./Add. Fees | Incl. in Cost of Shipment |
| Cost of Shipment | $13.31 per box |
1. Anything that can fit in a flat rate box, ship it via USPS
- The flat rate box that costs between $5 and $6 is about the size of a VHS tape, but USPS offers a variety of flat rate boxes at a number of prices. One should work with the local postal office to get the best possible price for shipping flat rate
- In practice, USPS can deliver a box to the west coast in 2-3 days. This delivery takes closer to 5 days using UPS.
- USPS has cheaper options for shipping small/light package that UPS or FedEx does not.
- Dealerships say it is easier to determine shipping rates for UPS and FedEx than for USPS and that the cost to ship medium to large items via UPS and FedEx is extremely advantageous as compared to USPS
| Shipping Provider Breakdown | Associated Costs |
|---|---|
| USPS | $5.63 per box |
| FedEx | $13.31 per box |
| UPS | $14.97 per box |
| 65% USPS : 35% UPS | $8.90 per box |
| 80% USPS : 20% UPS | $7.50 per box |
| System Average | $8.20 per box |
UPS. When establishing the average cost to ship a package via UPS one must consider the cost to ship a package, adjustments and/or additional fees brought on by UPS, UPS service charges, and shipping supplies provided by UPS at a fee.
COST TO SHIP VIA UPS = $14.97 PER BOX
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | $0.72 per box |
| Service Charges | $11.00 per week* |
| Billing Adj./Add. Fees | $1.90 per box |
| Cost of Shipment | $12.26 per box |
COST TO SHIP VIA USPS = $5.63 PER BOX
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | Free Flat Rate Boxes |
| Service Charges | $0.00 |
| Billing Adj./Add. Fees | $0.00 |
| Cost of Shipment | $5.63 per box |
COST TO SHIP VIA FedEx = $13.31 PER BOX
| Component of Total Shipping Cost | Associated Costs |
|---|---|
| Shipping Supplies Fee | Free Boxes and Envelopes |
| Service Charges | Incl. in Cost of Shipment |
| Billing Adj./Add. Fees | Incl. in Cost of Shipment |
| Cost of Shipment | $13.31 per box |
1. Anything that can fit in a flat rate box, ship it via USPS
2. Packages to the West Coast should ship via USPS
3. Anything light and/or small ship with USPS
4. Choose between UPS and FedEx for medium to large sized items, especially items going to an eastern state
System Average Cost. We found that following these guidelines a dealership would have a ratio of 65%-80% USPS to 20%-35% FedEx and/or UPS. Now we can determine an average for the system based on these goals.
SYSTEM AVERAGE COST TO SHIP PACKAGES = $8.20 PER BOX
| Shipping Provider Breakdown | Associated Costs |
|---|---|
| USPS | $5.63 per box |
| FedEx | $13.31 per box |
| UPS | $14.97 per box |
| 65% USPS : 35% UPS | $8.90 per box |
| 80% USPS : 20% UPS | $7.50 per box |
| System Average | $8.20 per box |
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