Collect / Prepaid Shipping

Collect and prepaid are the two fundamental freight payment arrangements that determine who controls the carrier relationship. On prepaid shipments, the shipper selects and pays the carrier, then typically builds the freight cost into the product price or invoices it separately. On collect shipments, the buyer – usually a retailer – controls carrier selection, negotiates the rate, and pays the carrier directly. The shipper simply tenders to the retailer's designated carrier per their routing guide.

The distinction matters far beyond who writes the check. On prepaid freight, the shipper has full control over carrier selection, service level, cost optimization, and transit routing – but also bears the full risk of delivery failures. On collect freight, the retailer dictates the carrier through their routing guide, and the supplier must comply exactly. Using an unauthorized carrier on a collect shipment, even if the delivery is perfect, violates the routing guide and typically triggers a chargeback.

Many CPG shippers operate in a mixed environment – prepaid for some customers, collect for others, and sometimes a mix within a single customer relationship depending on order size or lane. Managing both modes requires flexibility in how loads are planned and tendered. For prepaid shipments, the shipper is rate shopping across their full carrier network. For collect shipments, the system needs to automatically apply the retailer's routing guide and tender to the specified carrier without the logistics team manually looking up rules for each order.

Understanding your collect-versus-prepaid mix also has financial planning implications. Prepaid freight shows up as a direct expense on your P&L. Collect freight is less visible – the cost is embedded in the retailer's pricing terms – but routing guide compliance failures on collect shipments still cost you in chargebacks.