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Methodology

Shipping Profitability Planner methodology

Choose charged, subsidised or free shipping after weighted delivery costs.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Weighted Carrier Cost Per Order
weightedCarrierCostPerOrder = sum(zone share × carrier cost)

Where

weightedCarrierCostPerOrder
Weighted Carrier Cost Per Order (currency units, ex tax)Source: Calculated output
Shipping Contribution
shippingContribution = orders × (charge − required shipping charge)

Where

orders
Orders (operational units)Source: Business record
shippingContribution
Shipping Contribution (currency units, ex tax)Source: Calculated output
Recovery Rate
recoveryRate = shipping revenue / shipping cost

Where

recoveryRate
Recovery Rate (decimal rate)Source: Calculated output
Loss Per Order
lossPerOrder = max(0, required charge − actual charge)

Where

lossPerOrder
Loss Per Order (currency units, ex tax)Source: Calculated output
Required Shipping Charge Per Order
requiredShippingChargePerOrder = carrier + handling + expected return shipping

Where

returnShippingCostPerReturn
Return shipping (currency units, ex tax)Source: Business record
requiredShippingChargePerOrder
Required Shipping Charge Per Order (currency units, ex tax)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The worked rows below come directly from the registered engine and visible default fixture.

Calculation and outputs

Example

The worked rows below come directly from the registered engine and visible default fixture.

Weighted Carrier Cost Per Order
8.5 currency units
Shipping Contribution
-3,300 currency units
Recovery Rate
70.8%
Loss Per Order
3.3 currency units
Required Shipping Charge Per Order
11.3 currency units

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Shipping contribution shows whether the customer charge covers weighted carrier, handling and expected return-shipping costs.

3. Validation and boundary checks

  • All values must be finite and inside the visible validation boundaries.
  • Rates are entered as percentages and calculations retain decimal precision.
  • Money uses one consistent ex-tax currency and planning period.

4. Assumptions and source classification

  • Provider fees, exchange rates, return behaviour and operating performance are user-entered scenarios.
  • No provider plan, jurisdiction, tax rate or market benchmark is embedded.
  • The engine retains full precision and display formatting never feeds back into calculation.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The model does not forecast demand, provider changes, exchange rates or operational performance.
  • It does not replace accounting, tax, legal or financial advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Related reading

Guides to interpret the decision and its assumptions.

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