Short answer: Freight allocation is the step that turns a shipment-level cost into SKU-level truth, and the method you choose changes your margins on paper and your pricing in reality. The common methods are by weight, by volume, by value, and by unit count, and each favors different products. Weight-based allocation suits dense goods; volumetric suits bulky ones; value-based suits mixed catalogs where freight is small relative to product value. The right method is the one that matches how freight is actually priced for your shipments, checked periodically against reality. Whatever you choose, apply it consistently, because switching methods mid-year makes your margins incomparable.
Why allocation changes decisions
A single freight bill spread across a mixed container is not neutral: the allocation method decides which SKUs look profitable. Allocate a 10,000 dollar container by unit count and your heavy, cheap SKUs look like margin killers while light, expensive ones look golden. Allocate by weight and the picture flips. Neither is wrong in the abstract, but one of them matches how the forwarder actually priced the shipment, and that is the one that reflects economic reality. Pricing, promotion, and assortment decisions all inherit the allocation's biases, so this is not an accounting nicety.
The four methods and when each fits
By weight works when freight is priced by weight, which covers most air freight and dense ocean cargo. By volume (dimensional weight) fits bulky, light goods where the container fills up before it weighs out. By value spreads freight proportionally to product cost, which makes sense when freight is a small fraction of COGS and you want stable margin percentages. By unit count is the simplest and the least accurate, defensible only for homogeneous shipments. Many brands use a hybrid: dimensional weight for ocean, actual weight for air, which mirrors how carriers actually bill.
What most brands get wrong
The classic error is allocating by value across a catalog with huge price dispersion: a 500 dollar item absorbs fifty times the freight of a 10 dollar item, which understates the cheap item's true cost and overstates the expensive one's. Another error is ignoring the empty space: if the container ships half empty, the allocation should reflect the capacity you paid for, not the goods you moved. And the subtlest error is never revisiting the method: as the catalog mix shifts toward lighter or bulkier goods, the right method changes, but the spreadsheet stays frozen.
Making it operational
Build the allocation into your receiving process, not a quarterly spreadsheet exercise. When a shipment lands, the system should split the freight bill across the SKUs by the chosen method and store the per-unit landed cost with the inventory record. Review the method annually or when the catalog mix shifts materially. And keep the freight bill: when the landed cost looks wrong six months later, the ability to re-derive it from source documents is what separates a controlled process from a guess.
Should duties be allocated the same way as freight?
No. Duties are already SKU-specific through classification and value; they do not need allocation. Allocate only the costs that are genuinely shared: freight, insurance, and handling. Mixing the two muddies both.
What about split shipments?
Allocate each shipment's freight to the SKUs in that shipment. Averaging freight across shipments smooths reality into fiction; the shipment that flew air freight really did cost more per unit than the one that sailed.
How precise does this need to be?
Precise enough to rank SKUs correctly by margin. You do not need penny accuracy; you need the allocation to stop telling you that your worst product is your best one.
When do peak-season surcharges typically start?
Major carriers usually announce Q4 surcharges in late summer, with the first increases effective in October and further steps in November and December. Ocean peak surcharges often start earlier, sometimes August, tied to the transpacific contract season. Put the announcement dates on your planning calendar so the modeling starts before the invoices do.
Can small shippers negotiate surcharge caps?
Directly, rarely; through a forwarder or 3PL with aggregated volume, often. The forwarder's peak negotiations cover your freight if you commit volume early. Even without a formal cap, getting written surcharge schedules in advance lets you model accurately, which is half the battle.
Should we pass surcharges to customers as a fee?
A separate peak fee usually converts worse than baked-in pricing, and it trains customers to see your shipping as unpredictable. Most DTC brands do better adjusting product prices or free-shipping thresholds for the season. The exception is B2B, where line-item surcharges are normal and expected.