Shipping Zones Explained: Costs & Transit Times

Shipping Point LLC is a one-stop-shop for dozens of business products and services that will allow you to do what you’re good at while we take care of the “other stuff” you need to succeed. Shipping Point is a one-stop-shop for dozens of business products and services that will allow you to do what you’re good at while we take care of the “other stuff” you need to succeed. The top line (light green) represents the average Zone 8 shipment over time. Unsurprisingly, it is consistently the slowest zone to ship to, ranging from just over 3 days to 7.27 days at the very end of peak season 2020, just before 2021). If all of your inventory is fulfilled from one location – for example, out of New Jersey, as seen in the map below – it can take 5-6 days to deliver an order to a customer in Oregon. In fact, 73% of shoppers expect affordable, fast deliveries and 24% of customers cancel an order due to slow shipping.

The term is used to designate ownership between the buyer and seller as goods are transported. These international contracts outline provisions including the time and place of delivery as well as the terms of payment agreed upon by the two parties. When the risk of loss shifts from the seller to the buyer and determining who foots the bill for freight and insurance, all depend on the nature of the contract. The seller delivers the goods alongside a shipping vessel chosen by the buyer at a specified port. An FOB shipping point is a catch-all term for a contractual obligation that identifies the person who must bear the liability of a shipment.

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While FOB shipping point does transfer risk to the buyer, it may affect a seller’s reputation and sales conversion rate. Shipping costs are reduced, but fewer buyers are willing to accept shipping point terms, especially on large or fragile orders. Read all contracts carefully, calculate potential costs, purchase insurance—and consider negotiating additional terms in your shipping or sales agreement to protect against losses. Because of this, misunderstanding FOB shipping point terms can be costly for buyers.

It’s the cornerstone that defines who pays for shipping costs, who assumes ownership, and where responsibility begins and ends between a buyer and seller. Ultimately, the distributed inventory approach can help you eliminate the most expensive shipping zones, lower its average shipping zone number, and save on shipping costs. Some brands have even seen that distributing inventory across several fulfillment centers can reduce shipping costs by 25% and bring a 13% cost savings to their bottom line. Essentially, when the seller delivers the goods and ships them, they’re taking care of all the transportation costs up to the final destination. This often involves specifying in the shipping documents that freight is prepaid.

FOB Shipping Point vs. Destination

DAP, or “delivered-at-place,” says a seller agrees to be responsible for transporting goods to a location stated in the sales contract. Real-time driver tracking, customer notifications, proof of delivery, and seamless integration with existing systems make Upper a comprehensive solution. So, try Upper’s 7 days free trial and experience a faster, more reliable, and cost-effective movement of goods across your logistics operations. The buyer pays for the freight cost in the FOB shipping point agreement from the designated shipping point onwards. The FOB pricing point is the specific location where ownership and responsibility for goods transfer from the seller to the buyer during shipping. Each of these terms carries distinct implications for ownership, liability, and costs in the supply chain.

In the FOB shipping point, ownership shifts from the seller to the buyer when the goods are loaded onto the carrier at the point of shipment. The buyer is then responsible for transportation, including selecting the carrier, covering freight costs, and obtaining transit insurance. In addition to lowering average shipping cost through distributed inventory, some 3PLs will also negotiate bulk shipping discounts with major carriers. Ecommerce businesses can then choose whether or not to pass the savings onto their customers. Utilizing three fulfillment centers instead of one would enable more orders to be shipped to lower zones. In other words, the average shipping cost per order would dramatically decrease with the addition of each fulfillment center.

FOB shipping point always benefits the seller

Incoterms is updated each decade, with the 2020 Incoterms published in late 2019. Incoterms are agreed-upon terms that define transactions between shippers and buyers, so importers and exporters can speak the same shipping language. While Incoterms can apply to international trade and domestic shipments, UCC is primarily used for domestic shipments. Knowing the difference between FOB shipping and FOB destination can help you determine whether the shipping charges on your bill of lading are accurate or not. When the destination is the origin port, it’s known as the FOB shipping point. When the destination port is the location, it’s known as the FOB destination.

• The primary difference between the two contracts is in the timing of the transfer of the title for the goods.
• If all of your inventory is fulfilled from one location – for example, out of New Jersey, as seen in the map below – it can take 5-6 days to deliver an order to a customer in Oregon.
• Incoterms 2020 considers delivery as the point when the risk of loss or damage to the goods is transferred from the seller to the buyer.
• That means the delivery port is Savannah and Incoterms definitions are referenced.
• Prices are differentiated by the commodities’ growing origin, variety, size, package and grade.
• Shipping Point located at 6615 Grand Ave, Gurnee IL is the go-to resource for packing, shipping, printing and business service needs of the residents and businesses of Gurnee, IL.

For example, assume Company XYZ in the United States buys computers from a supplier in China and signs a FOB destination agreement. Assume the computers were never delivered to Company XYZ’s destination, for whatever reason. The supplier takes full responsibility for the computers and must either reimburse Company XYZ or reship the computers.