Shipping calculator

Shipping calculators are few and far between on the Internet today. But with a basic understanding of their functionality and their options, those available can be a powerful aid finding the best shipping options out there. In this article we try to explain in more detail, which needs they address and what to be aware of in selecting the best shipping calculator.

What is a shipping calculator?

A shipping calculator is a software solution built for the purpose of making shipping rates and service details available to its users in a meaningful, easy to read format. They intend to automate the process otherwise carried out manually by a freight forwarder in putting together a response to a price and service request from a customer.

The main challenge when developing a shipping calculator is to incorporate all the factors going into preparing the pricing response. This typically includes pricing as well as operational details of timing, locations of origin and destination facilities and available shipping services.

From the perspective of a service provider, or a freight forwarder, the calculator offers an opportunity to participate in many more pricing requests without associated manual workload. On the other hand, it does also create a market transparency, which not all providers are interested in.

Components of the shipping calculator

The output of the shipping calculator is determined by the input provided by the user. Typically, the minimum requirements for calculating and displaying relevant shipping options includes where the cargo is coming from, where it is going to, when it is ready to ship and what the cargo is. In addition, for more advanced shipping calculators, it is possible to request pricing on different service levels, by including components such as pick-up and delivery or customs clearance.

The output of the shipping calculator would as minimum include details of the available services, including departure time or when the cargo needs to be handed over at origin, total transit time, total price and details of the service provider performing the service. Advanced shipping calculators will also enable comparison of different shipping options based on key metrics.

In designing a shipping calculator, it is decided which rate components goes into the pricing database. To cover a complete end-to-end shipping solution, minimum seven components are required. The components included in the final price displayed to the user then depend on the service required.

Example

We take an example of buyer of a product, who has a commercial agreement on FOB terms (free on board – see Trading Terms for more details). She would be interested in calculating the shipping cost from the port at origin to the door of her warehouse at the destination, including import customs formalities at the destination country. Thus, ocean freight, destination handling, import haulage and import customs clearance will cover the service needed.

If a shipper, or an exporter, is selling goods on CIF terms (cost insurance freight – see Trading Terms for more details), likewise, only export haulage, origin handling, export customs clearance and ocean freight will be part of the price for the service required. Reason being that in this scenario, the importer will pay for destination handling, import haulage and import customs clearance.

Exchange rates

A good shipping calculator will also handle multiple exchange rates. This is important for having the accurate shipping cost displayed in the relevant currency to the users. Moreover, it is required, as the seven pricing components of the shipping calculator will often be offered in local currencies. With the fluctuations in the currency exchange rates, real-time or as minimum daily currency updates is a prerequisite for an effective shipping calculator.

The nine operational components

There are nine operational components going into defining a shipping service. These components are maintained by the service provider to ensure that the user gets all the details required. The two fundamental components defining whether a service is relevant for a particular calculation are the locations of the origin and the destination warehouses. If a user is searching for a price from China to UK, obviously it makes little sense to display a service from Singapore to Germany.

When the origin and the destination warehouses have been defined for the service, the transit time between the two warehouses and the frequency of the service (could for example we weekly) is included. In addition, the timing of the services is determined by the cargo cut off, which could for example be Thursday 4pm. Based on the cargo cut off and the transit time, the approximate time of the cargo availability can be calculated, and the result can be refined manually be adding the cargo availability. This could for example be that a warehouse in Manchester opens for cargo dispatch and collection at 11am.

Lastly, for all pick-up and delivery locations at origin and destination, the transit time to or from the warehouse will indicate when cargo can be picked up and delivered for a particular service. And the booking cut off, is a simple measure which tells the shipping calculator how much time in advance the provider will need to booking, in order to ship on a particular service.

Things to consider

No shipping calculator is better than the input going in to it. Users might experience that much more information is required to establish an accurate shipping rate, than for example when booking an airline ticket. The reason is explained above with all the different components going into the calculation. As such, the input required is used only for delivering a more accurate and better result for the user.

You can read more about the shipping process here.

The other source of input is the rate and service details going into the shipping calculator. Typically freight forwarders maintain this. Some shipping calculators keep their associated forwarders accountable for and contractually required them to delivery what is presented to the user, and some do not.

Lastly, a shipping calculator is a dynamic tool. The freight rates change, new services come online and disappear, and new service providers are added. So if you want to stay abreast with the latest services and rates available, sign up for news feeds and updates, if possible.

Transporteca is a shipping calculator. The platform is built on the above principles and takes all elements into consideration in the calculation, display and comparison.