Decoding Delivery Costs: 5 Numbers SMEs Must Track

You know your product cost to two decimal places. Delivery, for most SMEs, is one number somebody quoted eighteen months ago. That gap is where pricing goes wrong - not because delivery is expensive, but because only part of it sits in the price. Delivery is an input like fabric or a payment gateway fee, and it repays the same rigour.

The Seven Lines in a Cost to Serve

Every order carries some combination of these.

●        Base freight for the zone. What it costs to move a parcel from your pickup pin code to the customer's. A rate card is a grid, not a number.

●        Chargeable weight. The multiplier on base freight. It is the higher of dead weight and volumetric weight, where volumetric weight is (L x B x H in cm) divided by 5000. Flyer packages under 1 kg are charged on dead weight only.

●        COD handling. A per-order charge for collecting cash at the door and remitting it, usually the higher of a flat fee or a percentage of order value.

●        Packaging consumables. Box or flyer, tape, filler, label stationery and cushioning.

●        Returns provision. The share of forward freight, return freight and repacking you should expect across a hundred orders of this type, carried on every order rather than met by surprise.

●        Post-purchase support time. Minutes spent per order on tracking questions, reattempt follow-ups and refunds, at a loaded hourly rate.

●        Payment and channel costs. Gateway charges on prepaid, and commission on the channel the order came through.

Cost-to-Serve Breakdown: E-Commerce Apparel Shipping:

Returns Provision Belongs in the Price

The line owners most often leave out is the fifth one. A return is not an accident on one order; across a category it is a rate, and a rate can be budgeted. Once you carry the provision on every order, a return stops being an event that disturbs the month and becomes a number you already funded.

The provision also tells you where effort pays. At Rs. 43 of a Rs. 270 cost to serve, better size charts, verified phone numbers and a check on high-risk orders before dispatch move a bigger lever than anything else on the list.

Build the Worksheet for Your Top 3 SKUs

Do this in a spreadsheet, one row per SKU, one column per line above.

1. Pick your three highest-volume SKUs, not your three favourites.

2. Measure the packed box, taped and labelled. Compute volumetric weight, compare it against dead weight, use the higher.

3. Pull 90 days of orders per SKU for the actual zone split, and weight the freight line by that split rather than one lane.

4. Take COD share and average order value from the same pull.

5. Take the return rate from your own data, by SKU and not blended across the catalogue.

6. Divide cost to serve by selling price. That percentage is what shipping needs to earn back through price, threshold or shipping charge.

What You Can Do

●        Weigh and measure your top three packed SKUs and record both dead and volumetric weight against each one.

●        Run those dimensions and your real destination pin codes through the rate calculator in Delhivery One to get lane-level freight instead of an average.

●        Reconcile last quarter's invoices and reports in Delhivery One - shipment counts, chargeable weights, COD charges - against your own order data.

●        Add a returns provision line to every SKU costing sheet, and reprice anything where cost to serve exceeds gross margin.

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