August 23, 2023

Attaining Transportation Costs Transparency: How 3PLs Can Provide Clear Quotes

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Logistics costs are the cornerstone of strategic decision-making for many companies that deal with transportation. Businesses strive to optimize their shipping expenses by partnering with 3PL providers. However, such a collaboration may not remove all budget-related concerns since the price composition of many 3PLs often appears a complicated matter.

The cost calculation of logistics services depends on numerous factors and must be established individually in each case. This causes extra hassle for the clients since they need to contact a 3PL provider in order to identify the budget estimation.

Is there an opportunity to get the delivery price estimation quickly and accurately? What do the logistics providers’ costs include, and what factors influence these costs? The article addresses these questions and explains how 3PL cost calculators ease freight cost calculation.

What does a 3PL service cost include?

3PL providers typically deliver a comprehensive range of services covering various stages of logistics operations. To understand the essence of 3PL service costs, you should primarily discover which aspects of supply chain activities these costs encompass.

  • Transporting inventory. This is the primary and the most obvious area of logistics processes. In other words, this is the cost of delivering your products from one place to another. Apart from freight charges, this cost can also include taxes and customs duties.
  • Storing inventory. Your goods will most likely require storage in a 3PL facility. Warehousing costs are based on the space your products occupy and the storage period.
  • Picking and packing. To arrange products’ transportation, a 3PL provider needs to collect the items from inventory and prepare them for delivery. This is what the picking and packing stage entails. The amount of labor involved in the process and the complexity of orders shape these costs.
  • Assembly services. Some items require custom or branded packaging, while others may need such a preparation process as kitting. Kitting implies pre-assembling numerous products and collecting them together into a unified piece. If kitting or custom packaging is a service your company requires for transportation, then it will be one of the factors influencing the total 3PL cost.
  • Returns. Return management, otherwise known as reverse logistics, implies the administering of customer returns. The respective costs cover restocking or disposal fees of the returned items. Reliable 3PL providers embrace these processes to guarantee customer satisfaction and simplify the handling of orders.
  • Value-added services. The services that 3PL providers can offer do not end here. The prices for additional services, if your business requires such, are based on the demands in each specific case.

Notably, a customer may request either a complete range of the indicated services or any one of them separately. For instance, users may select storing and transporting together with the specified value-added services.

Logistics is a multifaceted process that considers a wide range of factors. Each transportation may require a particular approach, for instance, if you ship fragile or hazardous products. However, this fundamental list of factors influencing transportation expenses will give you an idea of the basic shipping cost composition.

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Fundamental factors that influence transportation costs

While the previous section shapes the vision of what shipping costs include, this one lists the core parameters that can impact the price of delivery services. Understanding these factors will help you forecast your expenses more accurately.

  • Size and weight of the package. The weight and dimensions of the cargo directly affect shipping costs. Heavier and larger products are usually subject to higher fees since they occupy more space and require more resources to deal with them. The cargo packaging type also influences the delivery price. For instance, palletizing is less expensive than bulk shipping.
  • Transportation distance. The distance between the origin and destination points plays a significant role in determining shipping costs. Longer distances often result in higher costs due to greater fuel consumption, labor, and time. Furthermore, remote or hard-to-reach areas might require additional resources, affecting shipping fees.
  • Delivery method. There are four different shipping methods based on the location and destination facility: Door to Door (D2D), Warehouse to Warehouse (W2W), Warehouse to Door (W2D), and Door to Warehouse (D2W). The choice of the specific method depends on the sender’s/recipient’s demands. In terms of costs, the D2D method can be relatively expensive, while W2W, for instance, is most cost-effective for businesses transporting large quantities of goods.
  • Delivery timeframe. A strict shipping timeframe may elevate costs since it would dictate expedited handling and transportation.
  • Customs and duties. International shipments are subject to customs duties, taxes, and import fees. These additional charges can significantly increase shipping costs.
  • Insurance. Shippers may opt for insurance to cover potential damage or loss during transit. Insurance costs can add to the overall shipping expenses.
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Why do shipping costs make 3PL providers lose clients?

One of the fundamental needs of businesses in their supply chains is the availability of timely and efficient transportation of their products. When choosing a logistics services provider, customers need a comprehensive view of what these services will include and how much they will cost. However, collecting quotes from multiple providers may be tedious and time-consuming. Furthermore, many providers fail to provide an accurate budget estimation right away. The lack of price transparency and customers’ inability to obtain accurate quotes quickly impedes business decisions and becomes the reason for customer attrition.

So, how to give clients all the information they need, enabling a successful partnership from the very start?

The answer is the freight shipping cost calculator.

What is a freight shipping cost calculator?

A freight shipping cost calculator is an online tool that helps estimate the cost of delivering cargo from one location to another. It considers the factors introduced above to provide the list of potential logistics partners and an approximate cost for transporting items.

An illustrative example of such an online platform is an FTL and LTL quote calculator by Wareteka, our side project.

Our calculator was specifically designed for the Ukrainian market to help companies address their challenge of finding the right carriers for their needs.

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A user-friendly interface invites a customer to enter the cargo location and destination points, shipping date, number of pallets, the type of transport, declared price, and weight. In a few seconds, a user receives several transportation options with the delivery cost estimation.

If you consider this tool for your business, think of Coreteka’s cost calculator. We can configure it according to your needs so that it would provide the most relevant price and additional functions upon your request. Furthermore, we can set up the calculator for other shipping methods, including LCL and FCL shipping, adding to the tool’s universality.

3PL cost calculator pros and cons

Although the 3PL cost calculator benefits may seem obvious, the solution has both upsides and limitations.

3PL pricing calculation benefits

  • Quick estimates. 3PL cost calculators instantly provide cost estimates, helping businesses make informed decisions.
  • Cost comparison. With the help of calculators, businesses can compare quotes from different 3PL providers and identify the most cost-effective option.
  • Price transparency. Calculators provide cost breakdowns, helping clients understand various components contributing to the overall logistics expense.
  • Scenario analysis. By using calculators, customers can input different variables (e.g., shipping methods, distances) to analyze how changes affect costs.
  • Time savings. Calculators save customers’ time by immediately delivering estimates and eliminating the need to calculate prices manually or contact multiple providers for quotes.
  • Time and effort savings for a 3PL provider. With calculators, upfront cost estimation is transferred to a customer. Such a delegation saves providers’ time and allows them to filter out irrelevant requests at the early stages. Thus, if the price, destination, packaging type, or other parameter doesn’t suit the customer’s needs, a customer will not go on with this provider.

3PL cost calculator drawbacks

  • Lack of context. Calculators may not regard unique circumstances or market trends, e.g. fuel price change, economic regulations, or specific industry requirements that could impact logistics costs.
  • Inaccuracies. Some freight goes beyond standard transportation parameters. For instance, in the case of oversized loads, the logistics cost calculations may require human interference for accurate estimations.
  • Dependence on data. The accuracy of calculator estimates depends on the accuracy of the data entered. Faulty inputs can lead to misleading estimates.
  • Additional costs. Some calculators might not include all potential fees and surcharges, leading to surprises when the final bill arrives.
  • Changing variables. As logistics costs are influenced by various external factors (e.g., regulatory changes and geopolitical events), calculator estimates might become outdated quickly.
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3PL shipping cost FAQ

🔴 What is the freight cost in the shipping process?

Freight cost in shipping refers to the expense of transporting goods from their location to the destination. It encompasses a range of factors such as distance, weight, transportation mode, route, cargo type, service level, and additional services. Freight costs are crucial for businesses in their supply chain management planning, as they impact budgeting, profit margins, and overall logistics operations.

How do I calculate freight costs?

One way to find out freight costs is to contact a logistics service provider who can prepare a quote based on your requirements. Another way is to leverage an FTL and LTL quote calculator that can save you significant time and effort. You should just enter the main parameters of your cargo and delivery, and the tool will calculate the approximate price instantly. Furthermore, calculators may provide several carrier options and perform additional functions.

🔴 What is included in freight costs?

Freight costs embrace a range of services, such as transportation and storing goods, picking and packing, assembly services, returns, and other shipping-related activities. However, specific transportation that falls beyond the standard parameters may require additional services, adding to overall freight costs.

An afterthought

Shippers experience the continual challenge of getting quick and accurate estimations of their transportation expenses. To address the issue, 3PLs can implement LTL cost calculators, allowing them to reach maximum cost transparency and enabling users to book services right away.

The 3PL cost calculator benefits are significant for users since they allow obtaining budget estimates and carrier options in seconds. However, they still have their restraints. Nevertheless, they successfully mitigate one of the fundamental supply chain management needs: estimating the transportation budget in advance and as accurately as possible.

Contact us to get your tailored solution and give your target audience a solid argument in your favor.