Price Calculation Methods

🎯 What Are Calculation Methods?

Calculation methods are the different ways the system determines the final price of a shipment. Each method uses different logic based on the package’s characteristics and your business needs.

📊 Available Methods

1️⃣ Fixed Price (Flat Rate)

How does it work?

A single price regardless of the package’s weight, size, or contents.

Example:

• Envelopes and documents: $5 always
• Small box: $10 always
• Local express service: $25 always

Advantages:

✅ Simple for the customer to understand ✅ Easy to manage ✅ Fast to quote ✅ Predictable for budgets

Disadvantages:

❌ Can lose money on heavy packages ❌ Can be expensive for light items ❌ Doesn’t adjust to real transport cost

Ideal for:

• 📄 Documents
• 📦 Standardized products
• 🏃 Urban express services
• 💼 High-volume corporate customers

2️⃣ Price by Weight

How does it work?

The price is calculated by multiplying the package’s weight by a per-kilogram (or per-pound) rate.

Basic formula:

Price = Weight × Rate per kg

Full example:

Configuration:

• Base price: $3
• Price per kg: $2
• Minimum billable weight: 1 kg

Calculations:

• 0.5 kg package → Charged as 1 kg → $3 + (1 × $2) = $5
• 5 kg package → $3 + (5 × $2) = $13
• 10 kg package → $3 + (10 × $2) = $23

Variant: Tiered Rates

Different prices depending on weight ranges:

Example:

• 7 kg package → Falls in the 5-10 kg range → $18
• 55 kg package → Falls in the last tier → $75

Each tier carries a total price, not an additional per-kilo price. To leave the last tier open (“50 kg and above”), leave its maximum weight blank.

A package that weighs exactly a tier’s starting weight doesn’t fall into it yet. With the table above, exactly 5 kg is charged in the 0-5 kg range.

Advantages:

✅ Fair and proportional ✅ Covers transport costs ✅ Flexible with different configurations ✅ Industry standard

Disadvantages:

❌ Requires weighing every package ❌ Harder to explain ❌ Can be expensive for heavy items

Ideal for:

• 📦 General merchandise
• 🏭 Industrial shipments
• 🛒 Varied e-commerce
• 📮 Traditional parcel delivery

3️⃣ Price by Volume (Volumetric Weight)

How does it work?

Considers the space the package takes up, not just its weight. Useful for large but lightweight packages.

Formula:

Volumetric Weight = (Length × Width × Height) ÷ Volumetric Factor

The system compares the real weight with the volumetric one and charges the greater. We call that resulting weight the billable weight.

Important: the by-volume method doesn’t have its own prices. When configuring it, you choose an existing by-weight price template, and the system uses it to price the billable weight. That’s why you need at least one weight template created before you can create a by-volume rate.

Practical example:

Configuration:

• Volumetric factor: 5000
• Selected weight template, with price per kg: $3

Package: Box of 50×40×30 cm, real weight 3 kg

Calculation:

1. Volume = 50 × 40 × 30 = 60,000 cm³
2. Volumetric weight = 60,000 ÷ 5000 = 12 kg
3. Comparison: Real (3 kg) vs Volumetric (12 kg)
4. Charged by: 12 kg
5. Final price = 12 × $3 = $36

Common Volumetric Factors:

• 5000: Ground transport
• 6000: Sea transport
• 4000: Air express transport

Advantages:

✅ Fair to the carrier ✅ Optimizes use of space ✅ International standard ✅ Avoids losses on bulky packages

Disadvantages:

❌ Complex to explain to the customer ❌ Requires measuring every package ❌ Can be expensive for bulky items

Ideal for:

• 🎈 Inflatable products
• 🪑 Light furniture
• 📦 Large boxes with little weight
• ✈️ Air shipments

🔄 Combinations and Special Cases

Each rate uses a single method

A rate is configured with one calculation method and always uses it. The system doesn’t change methods based on the package.

If you want the same service to be charged differently depending on the shipment, the way to do it is to create several rates for the same route and service, with different priority numbers and weight or size limits. The system will try the lowest-priority one first and, if the package doesn’t fit its limits, move to the next.

Base Price + Variable

Combines a fixed cost with a variable one:

• Base: $5 (handling and processing)
• Variable: $2 per kg
• Total: $5 + (weight × $2)

The per-unit price only applies when the weight doesn’t fall into any tier. If you configure tiers, the tier price replaces the per-unit calculation and is added to the base price.

Minimum Billable Weight

You can set a minimum weight that’s billed even if the package weighs less. With a 1 kg minimum, a 200 g envelope is billed as 1 kg.

In the by-volume method there can be two minimums: the weight template’s and the volumetric calculation’s own. When that happens, the greater of the two applies.

Templates Are Shared

The by-weight price configuration (base price, per-unit price, and tiers) lives in a template that can be reused across several rates.

⚠️ Editing a template changes every rate that uses it, including by-volume rates that have it selected. Check how many are using it before touching it.

Kilograms and Pounds

Each rate has its own unit. If the shipment’s weight arrives in a different unit, the system converts it before calculating and before checking the rate’s limits.

📈 Comparative Examples

Case 1: 200g Document

Best option: By weight (cheapest)

Case 2: Normal 5kg box, 30×20×15cm

Best option: By weight (fairest)

Case 3: Large light box, 2kg, 60×50×40cm

Best option: Fixed price (for the customer) / Volume (to cover costs)

🎯 How to Choose the Right Method

Analyze Your Operation

If your shipments are:

• ✉️ Mostly documents → Fixed Price
• 📦 Varied weights → By Weight
• 🎈 Large but light → By Volume
• 🔄 Very varied → Combine methods

Consider Your Costs

Fixed Price if:

• Your costs are predictable
• Volume justifies averaging
• You want operational simplicity

By Weight if:

• Weight impacts your costs
• You need precision on margins
• It’s the standard in your industry

By Volume if:

• You use air transport
• Space is your constraint
• You handle bulky products

Think About Your Customers

For End Customers:

• Prefer fixed price (simplicity)
• Understand by weight (familiar)
• Get confused by volume (complex)

For Businesses:

• Accept any method
• Prefer the cheapest one
• Value transparency

🛠️ System Configuration

For Fixed Price:

1. Select “Flat Rate”
2. Enter the single amount
3. Optionally, set weight/size limits
4. Save the configuration

For Price by Weight:

1. Select “By Weight”
2. Define:
   • Base price (optional)
   • Price per kg
   • Minimum billable weight
3. If using tiers, configure each range
4. Save the configuration

For Price by Volume:

1. Select “Volumetric”
2. Define:
   • Volumetric factor (e.g., 5000)
   • Price per volumetric kg
   • Whether combined with real weight
3. Save the configuration

💡 Tips and Strategies

To Maximize Profits:

1. Analyze your historical shipments

   • What’s the average weight?
   • What’s the average volume?

2. Calculate your break-even point

   • Real transport cost
   • Desired margin
   • Competitive price

3. Offer multiple options

   • The customer chooses based on their need
   • You cover every scenario

To Simplify Operations:

1. Start with fixed price

   • Simplest to implement
   • Easy to communicate

2. Evolve gradually

   • Add by-weight as you grow
   • Implement volume if you need it

3. Automate the calculation

   • The system decides the method
   • Always applies the right one

⚠️ Common Mistakes to Avoid

❌ Not accounting for minimum weight

Problem: You lose money on small shipments Solution: Always set a billable minimum

❌ Incorrect volumetric factor

Problem: Uncompetitive prices or losses Solution: Use the standard factor for your industry

❌ Not updating prices

Problem: Margins eroded by inflation Solution: Review and adjust quarterly

❌ Excessive complexity

Problem: Confused customers, operational errors Solution: Keep it simple, add complexity gradually

📊 Real Case Study

Company: QuickShip Express Situation: Migrating from fixed price to a mixed system

Before (Fixed Price Only):

• Envelopes: $5
• Small box: $10
• Large box: $20
• Problem: Lost money on heavy large boxes

After (Mixed System):

• Documents: Fixed price $5
• Packages < 5kg: By weight ($2/kg)
• Packages > 5kg: By volume where applicable
• Result: 15% more profitable

🎓 Summary

🚀 Next Step

Now that you know the calculation methods:

1. Define your pricing strategy
2. Review Practical Examples
3. Check the FAQ

Questions about which method to use? Our team can help you choose the best one for your business.