What are Delivery Charges?

Delivery charges are additional fees charged to cover product transportation and delivery expenses. They can include the cost of shipping and handling to pack and transport goods, along with associated expenses. Fees may appear as a separate line item on an invoice and may be paid to the vendor or directly to the shipping company. 

Delivery charges vary across carriers and vendors, but most fees depend on these factors:

• Real-time costs according to fuel cost, mileage traveled, package weight, and volume
• Product packaging expenses
• Insurance for items shipped
• Customs fees and taxes
• Delivery time
• Mode of transportation

How do Vendors Calculate Delivery Charges?

Delivery fees have been on an upward trend since the pandemic, exacerbated by rising fuel prices and inflation. Every year carriers adjust base rates and implement a general rate increase (GRI) that typically increases shipping fees by 4 to 6% annually. 

Implementing an annual price hike allows shipping companies to adjust for inflation and offset the rise in operating costs. 

Aside from this adjustment to the base rate, shippers and vendors may charge add-on fees. 

Surcharges implemented by carriers may include the following. 

• Peak season surcharge – Carriers charge higher fees during the busiest shopping seasons to offset extra equipment and labor costs to process a higher volume of packages
• Fuel surcharges – Fuel surcharges account for the volatility of international energy markets and surging fuel costs. 
• Oversize Packaging surcharge – Packages exceeding size and weight thresholds require extra fees 
• Saturday Surcharges – When deliveries happen during the weekend, carriers may charge an extra fee 
• Declared Value Surcharge – Shippers may pay extra when the value of the package exceeds the liability limit of the carrier
• Address Correction Surcharge – Some carriers charge fees for shipments with an incorrect or incomplete address 
• Delivery Area Surcharge – When the delivery address is outside a carrier’s standard delivery area, there may be added fees

How Do Freight Costs Affect Businesses?

B2B order deliveries are bulkier, palletized and delivered via freight. Regulations in some industries where companies procure raw materials internationally or handle hazardous materials may require special handling and more complex processes – making it more expensive to arrange deliveries.

When freight costs increase, the total cost of manufacturing or selling a product or service will also go up. 

Dealing effectively with price changes requires companies to:

• Forecast projected purchases and sales and how changes in these numbers affect the freight budget
• Review the transportation strategies regularly to minimize costs for you and your customers. Consider how different scenarios like changing carriers, lower fill rates, and streamlining packages affect your shipping fees. 
• Understand issues affecting logistics companies that could increase or decrease shipping fees
• Increase visibility and transparency across all delivery-related expenses to optimize freight costs, increase efficiency, and provide accurate data to facilitate decision-making. 

What Can AP Teams Do To Understand Delivery Charges? 

Businesses have to understand what they are paying for – the base delivery fee, fuel rates, regular surcharge, service fees, peak season surcharge, and other fees. With the increasing need for cost transparency, more businesses turn to automated accounts payable solutions. Smart technology allows your AP team to dig deeper into expense data for enhanced cost and variance analysis. 

With the right tools, AP departments can improve delivery charge forecasts using historical data and by adjusting for inflation. At the same time, automation makes it easier to audit invoices and spot irregularities and errors in delivery charges.

Manage Freight Costs Better With SoftCo

As freight costs increase, AP teams need to proactively monitor and validate price changes without getting slowed down by manual reviews. Understand your costs without sacrificing speed by using SoftCo’s Procure-to-Pay solution. Process invoices faster and more accurately, even with unexpected delivery surcharges.