Direct Shipping Costs

• Direct shipping costs are the actual prices manufacturers must pay to ship products. These include packaging materials and the wages to pay laborers to pack products for shipping. The carrier, such as the post office, United Parcel Service or Fedex, also charges the manufacturer for shipping, and this is a direct cost. Manufacturers also pay for extra heavy packages and express delivery.
  
  

Semi-Direct Costs

• Manufacturers can add semi-direct costs to their shipping charges. These include warehousing inventory, insurance to protect shipped items from loss or damage, and rent on distribution centers. The manufacturer will incur labor costs for personnel to process returns, and there will be depreciation on equipment, such as forklifts and computers.
  
  

Indirect Costs

• Manufacturers must consider wages paid to managers to oversee shipping and returns. In addition, the company must pay to replace lost or damaged items and must periodically pay personnel to conduct an inventory of warehoused goods.
  
  

Price Mechanism

• Manufacturers should establish a price mechanism that takes into account direct costs, semi-direct costs and indirect costs. These should be based on an in-house study of how much it actually costs to fulfill orders. Once shipping charges are reality-based, shipping and handling charges can be substantiated in the event of a customer inquiry.