The Pros and Cons of Flat-Rate Shipping

Close-up image of a delivery person handing a parcel box to a customerPriority Mail, One Rate, and Simple Rate. Odds are, if you regularly ship small parcels, you’ve heard of these terms. Flat rate shipping is a popular option in the e-commerce logistics market. Due to the ease of use and ability to ensure consistent cost, many small businesses have found flat-rate shipping to be an optimal solution. But the question that remains for most is: Can flat rate shipping truly lower my cost? 

The logistics landscape

The logistics world today is changing faster than ever. To stay competitive, every aspect of your transportation landscape must be up to date with the latest relevant offerings. Currently, the market receives new GRI (gradual rate increases) annually at a minimum, as well as newly adjusted accessorial fees of all kinds. Keeping up with these changes can quickly become overwhelming. Yet, overlooking them will swiftly erode even the most aggressive profit margins. Flat-rate shipping may be the solution for consistent pricing amidst these constant changes.

Pros and cons of flat-rate shipping

Flat-rate shipping is a service that allows you to ship any parcel product that can fit inside a certain specification (typically a box) at a set flat rate, regardless of domestic destination. Set pricing brackets break down the cost by a single factor of packaging, in comparison to the many factors that are considered in a traditional ground shipping agreement.

Continuing to simplify this option is the fact that it is truly a single factor of pricing, as even most accessorial charges are removed completely. This option can be great for controlling internal decisions regarding service level, decreasing transit time, and allowing for minimized training time.

The gamble is that with each shipment, you may win or lose vs. a traditional ground pricing option. Along with the gamble, you also have to remember that the boxes that are offered in this program are not cut to match your specific needs, and you may find that not every shipment will match a standard flat-rate box.

Traditional pricing options vs. flat rate

Traditionally, we see parcel transportation broken down into two service options: Express and Ground. Each option will have agreements written to give specific discounts on a seemingly endless number of variables, from transit time to the weight of each shipment. The fact that there are so many variables can negatively impact your bottom line when managed improperly. However, a well-tailored agreement can specifically target your product and ensure a consistent profit margin.

The question now becomes: How do traditional pricing options compare to Flat Rate Shipping?

Finding an optimal solution

When comparing these options, there is one core question you should answer to truly find the best option: What is the true landscape of my current transportation needs? This answer is the key to supply chain profitability.

Yes, flat-rate shipping is simpler and it can remove a lot of accessorial charges, but what are you losing when you make that change? The opposite should be asked about traditional pricing options, as there are additional charges you must understand and control.

The more time I spend working in logistics, the more I learn that I am truly a student of the trade — I continue to learn as the landscape evolves. As Daniel J. Boorstin said, “the greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.”

The optimal solution is to truly and accurately understand your specific needs and build your solutions in line with those needs. A well-tailored agreement can contain both flat-rate shipping and traditional pricing options in a beneficially compounding way.