Knowing how shipping zones fit into your overall order fulfillment strategy helps you:
- Better understand how they affect shipping costs and delivery speed.
- Determine whether you can offer customers affordable shipping options and what you’d have to do to make that possible.
- See how much of an impact shipping zones have on your company’s profit margins and take necessary steps to reduce shipping costs.
In this post, we’ll start by explaining what shipping zones are and then dig deeper to see why they’re important in the context of e-commerce order fulfillment.
What Are Shipping Zones?
In simple words, a shipping zone is a geographical region to which carriers deliver. It’s defined by a grouping of zip codes and measured from where the package is shipped from (also called the point of origin) to its destination.
Shipping zones are assigned based on the distance a package travels from the warehouse to the end customer. In the United States, for example, shipping zones range from Zone 1 to Zone 8.
Most shipping carriers determine shipping zones based on the distance from where the package is shipped from, to the destination:
Now that we have a basic understanding of what shipping zones are and how they’re defined let’s take a closer look at how (and why) they play an integral role in your online order fulfillment strategy.
Shipping Zones in E-Commerce Order Fulfillment
Here are some of the ways e-commerce shipments are affected by shipping zones:
Calculating Shipping Zones
Shipping carriers calculate zones depending on where the package is shipped from. This means that two packages sent from different warehouses to the same destination could be delivered to different shipping zones.
For example, a package delivered from Arlington, Texas to Salt Lake City, Utah (left) would be in transit for around three days whereas a package delivered from Boston, Massachusetts to Salt Lake City, Utah (right) might take up to five days due to it being in a higher shipping zone.
Here’s how USPS calculates shipping zones:
Zones are determined on the basis of the distance a package covers from point X to point Y and are calculated from the first three digits of the shipping item’s origin and destination zip codes. The nearest (most inexpensive) region to ship to is represented by Zone 1 whereas the furthest (and, thus, most expensive) is Zone 8.
For instance, if you were to send a package through USPS from Dallas, Texas to Portland, Oregon, the shipping zone would be Zone 7. And, if you were to send a package from Dallas, Texas to Arlington, Texas (i.e., locally, within the same state), it would be Zone 1.
Here are some of the different tools you can use to calculate the shipping zones for packages:
FedEx Find Zones: Enter the zip code you’re shipping from, choose the country you want to ship to, enter the zip code you’d like to ship to, and click Find zones to find out the express and grounds zones.
USPS Domestic Zones Chart: Click on the Get Zone for ZIP Code Pair tab, enter the origin and destination zip codes, enter the shipping date, and click Submit to determine your shipping zones.
Effect on Shipping Costs and Delivery Speed
Carriers use shipping zones to determine how much they’ll charge for their services.
For instance, USPS’s zoned services include: Priority Mail, Bound Printed Matter, and USPS Retail Ground, whereas it charges a flat rate on USPS Marketing Mail, Media Mail, and First-Class Mail.
The shipping costs for zoned services are calculated based on the destination zone – higher prices for higher shipping zones.
Customers living closest to your geographical proximity (for example, in Zone 1 or Zone 2), will receive their packages faster and at lower shipping fees as compared to those residing in higher shipping zones (such as Zone 7 or Zone 8).
For this reason, it’s important for businesses to actively work towards reducing the time it takes for a package to reach the customer since longer shipping times may discourage customers from placing orders in the first place.
Consumers want faster, less expensive shipping options. Studies indicate that customers now expect 4.5 days to be the maximum acceptable delivery time – down form 5.5 days in 2012.
Here’s a map of USPS’ shipping dates that shows the transit time it takes for each shipping zone from Arlington, Texas. You can see that zones closest to Arlington will be delivered faster, while customers living farther will receive orders later.
Affordable Free Shipping
Shipping carriers are always actively working towards offering competitive shipping rates with faster delivery options.
However, offering free, two-day, or affordable shipping options to your customers may work against you – especially as deliveries to higher shipping zones add up. Online merchants need to take a step back and consider how offering affordable shipping options will inevitably affect their profit margins and the bottom line.
Here are the three main ways you can offer affordable (or even free) shipping options to customers without breaking the bank:
- Set a threshold dollar value at which you’ll offer them free shipping. For example, free shipping on all orders over $150.
- Add the price of the product and the average shipping charges to come up with the product’s new price. For example, if a product normally retails at $25 and the average shipping charges come out to be around $4.95 per product, you could price the product at $29.95 with free shipping.
- Ship to fewer (and lower) zones to avoid high shipping charges altogether.
Multiple Fulfillment Centers
The greater the distance between your warehouse and the end customer, the higher the zone and, thus, the higher the delivery charges.
Simply put:
Fewer fulfillment centers = Higher shipping zones = Higher shipping charges
More fulfillment centers = Lower shipping zones = Lower shipping charges
One way to reduce shipping fees is by increasing the number of fulfillment centers you use to store, pick, pack, and ship your inventory. This way you can complete orders from the location that’s nearest to your customers, enabling you to effectively decrease the total transit time and offer low-cost shipping options.
With one fulfillment center, it’s difficult for businesses to offer one- or two-day shipping to customers. Instead, you’ll have to consider expensive shipping options (such as air freight) in order to deliver on your quick-delivery promise.
On the flip side, with multiple fulfillment warehouses, you’ll be able to offer customers two-day shipping for a relatively low shipping rate.
Depending on the fulfillment centers’ locations, your shipping zones might change to the point that you no longer have some of the higher zones on your shipping radar. For example, if you were to have a fulfillment center on the East Coast, one on the West Coast, and a third on the Gulf Coast, you’d effectively eliminate Zone 7 and Zone 8.
Essentially, you’d be storing a portion of your inventory in multiple locations and fulfilling customer orders from the facility that’s closest to them. A third-party logistics provider can help you do just that.
This way, whenever a customer places an order, it can be delivered from a warehouse closest to their shipping zone. Doing so, effectively reduces shipping fees and speeds up delivery times.
A 3PL company enables you to tap into their warehousing management system (WMS), carrier networks, and expertise. They’ll be able to integrate your online stores with their WMS to automatically receive customer orders, route it to the correct warehouse, and determine the optimal fulfillment center or warehouse from which to ship packages.
Conclusion
Developing a better understanding of shipping zones and how they affect your e-commerce order fulfillment strategy can help you optimize shipping costs and offer affordable, fast delivery options to customers.
By working with a 3PL service provider, you’ll be able to tap into their network of carriers, fulfill customer orders from multiple locations, and offer affordable shipping options to customers without hurting the bottom line.
What are some of the strategies you follow to optimize shipping and handling costs? Let us know in the comments section below.
FAQ
How does the use of multiple fulfillment centers impact shipping zone costs?
Using multiple fulfillment centers strategically located across different regions can significantly lower shipping zone costs. By shipping from a location closer to the customer, businesses can reduce the distance packages must travel, thus lowering the shipping zone and associated costs.
Can businesses negotiate better rates with carriers based on their shipping volume and zone distribution?
Yes, businesses can often negotiate better shipping rates with carriers by leveraging their shipping volume and the distribution of shipments across different zones. By demonstrating a consistent volume of shipments or a plan that optimizes carrier efficiency across zones, businesses may secure more favorable rates.
What strategies can small businesses employ to minimize the impact of shipping zones on their shipping costs?
Small businesses can minimize the impact of shipping zones on their costs by choosing packaging that maximizes space and minimizes weight, consolidating shipments to reduce the number of packages, and considering regional carriers that may offer more favorable rates for specific zones.