Have you ever wondered why your freight and shipping costs cost you so much? Now you don’t have to. We researched some of the most common reasons as to why your freight shipping is costing you an arm and a leg. Keep in mind that these costs also fluctuate depending on dynamic costs associated with freight delivery.
Fuel
Regardless of the type of delivery service a retailer chooses for their operation, all modes of transportation rely on fuel. As the price of fuel fluctuates, it is common for shipping costs to fluctuate alongside this. Therefore, if fuel prices fall, trucks become cheaper to operate and the price of transport goes down. These savings or losses are passed on to consumers either indirectly or through a fuel cost component that is built into a carrier’s pricing model or invoice.
Fuel costs will be based on the distance that must be covered from the sender of the consignment or the package to the person receiving it at the end. Unfortunately, just like the rest of the markets around the world, retailers can’t do much to keep fuel prices down.
Demand of Freight
Some freight shipping will depend on the demand for products. This depends on the volume of products being shipped by operators and if capacity is limited, operators may be induced to sell limited space at a premium.
Giant retailers like Amazon, for example, offer 2-day shipping. As Amazon is an eCommerce giant, they can easily handle these delivery costs and timeframes, however, this isn’t the case for all retailers. Same-day or overnight shipping options are possible, but come at a higher cost to the consumer.
Labour Market
As the demand for freight recently reached a new high, increasing wages and competition among carriers for truck drivers has had an upward impact on transportation costs. As the trucking industry is typically an older demographic with older drivers retiring, carriers may struggle to find operators for their vehicles. Recruiting new drivers is not easy; it is a tough gig and typically requires a different class of driver license. Additionally, some of the courses to certify new drivers can take anywhere between weeks or months to complete!
Vehicle Capacity
Some trucking companies operate an older, smaller fleet. While these trucks are entirely adequate, newer trucks are designed to maximise storage space, allowing a truck to split space even further. To determine the weight class of your delivery, the service provider will ask for the weight of your shipment, the size of the package and then come to a conclusion on the difficulty of shipping your item. With this comes considerations to see whether or not loading equipment or additional loaders are needed to load or unload the cargo, and also if the products that are being shipped are labelled as fragile. If your package falls under any of these considerations, the freight cost may increase.
All of this is significant as the weight and size are fundamental to knowing how much space is required in the vehicle that is transporting your goods. In the case that your shipment is larger in scale and requires a fleet of trucks, the charges will obviously increase for more drivers and the more space you need.
To combat the high pricing, retailers can be smart with their packaging and branding, which can cut significant costs. Perfectly fitted packaging materials are not only cost-effective, but can also keep your product more safe!
Government Regulation
Some governments may regulate the amount of emissions that their drivers emit every day by reducing their driving hours. For example, New Zealand’s Emissions Trading Scheme has been estimated to increase freight costs by several dollars for every thousand kilometers travelled.
Weather
Contrary to popular belief, the weather does affect shipping costs and logistics. Either at the pick-up or drop-off location, incoming weather can cause significant delays and other unforeseen issues with orders. This is because ports and transportation hubs will still charge the retailer regardless of the delay due to unforeseen weather circumstances. This is the same for airlines, container ships, and trucking services.
Distance
Distance is one of the most important factors affecting a retailer’s shipping costs. The farther away the product’s origin is from the destination, the more expensive it is to ship a package.
Delivery Surcharges
The most challenging costs to account for are miscellaneous delivery surcharges. These surcharges come in many forms with the most common being:
- Area specific charges for rural, hard-to-access, or remote locations not included in your carrier’s range
- Handling fees for shipments above a set weight, size, or dimensions
- Residential surcharges for any businesses using a home address
- Fuel surcharges
- Weekend or Saturday surcharges for overtime shipping
Consumer Product Insurance
Merchants are not required to purchase shipping insurance, however, offering insurance is a great way to entice consumers to purchase their products. Insurance costs are typically used for items that are of high-value and one-of-a-kind. This is so it provides a level of security to the customers.
Have you ever thought of these reasons behind why your shipping costs are so high? Let us know your thoughts below!
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