Distributor Free Freight Policy Template
A free freight threshold is one of the most visible pricing decisions a distributor makes, yet many sales teams apply it inconsistently. This template documents the rule so everyone works from the same page.
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Distributor Free Freight Policy Template
Midwest Industrial Supply Freight Policy
Effective date: 2026-11-01
This policy explains how Midwest Industrial Supply charges for shipping so that customers and our sales team know what to expect on every order.
Free Freight
Orders totaling $750 or more before tax ship at no freight charge within 150 miles of the shipping branch, delivered by company truck. The order value is based on invoiced merchandise and excludes tax, special freight and any items marked as freight-excluded.
Orders Below the Threshold
Orders below $750 are subject to the following: $15 on orders below the threshold. Freight terms for these orders: Prepaid and add.
Expedited and Special Shipments
Next-day and same-day shipments are billed at actual carrier cost plus a handling charge, and are never covered by free freight.
Exceptions
Exceptions such as contract customers, stocking agreements, or oversized and hazardous goods require approval from: Customer service manager. Approved exceptions must be recorded on the customer account or the sales order.
Policy Review
| Item | Owner | Review frequency |
|---|---|---|
| Threshold level | Sales manager | Annual |
| Small order fee | Finance | Annual |
| Exceptions list | Customer service | Quarterly |
Approvals
This is a starting point for internal use, not legal advice. Have counsel review any customer-facing terms, and confirm how your ERP applies freight charges before release.
Freight absorption analysis
Optional: we can show how freight absorbed on free-freight orders could be measured from your ERP data.
Optional. The tool and every export work without this. No spam.
How to use it
Fill in the threshold, delivery area, small order fee and expedite rule that match your commercial decision, then export the document as PDF or Word. Share it with customer service, outside sales and your ERP administrator so the system configuration matches the written policy. Review the document with finance before release.
- Set the threshold from your cost data, not from competitors alone.
- Define whether the threshold uses pre-tax merchandise value.
- Decide in writing who may approve exceptions.
Setting the threshold
A rough break-even threshold equals your average freight cost per order divided by your gross margin percent. If an order ships for 40 dollars and your margin is 25 percent, you need about 160 dollars of sales to cover freight on that one order, before any other costs. Most distributors set the threshold well above this to fund handling and overhead, and to nudge customers to consolidate orders.
Keeping it consistent
Policy drift happens when exceptions become habit. Keep an exceptions list, review it quarterly and look at how often the threshold is waived. If the same customers always get an exception, they may need a contract term instead. Align ERP freight rules and carrier settings with the written policy so billing is automatic.
Common mistakes
Writing a threshold that uses invoiced total including tax confuses customers and customer service. Not covering expedites lets rush shipments eat margin. And leaving out a small order fee gives customers no reason to batch purchases, which drives up your cost to serve.
Frequently Asked Questions
What is a typical free freight threshold?
It varies by vertical, order size and margin. Many distributors use a threshold of a few hundred dollars, set from their cost to ship and gross margin. Use your own data to choose it.
Should small order fees be included?
A small order fee helps cover the fixed cost of picking and shipping small orders and encourages consolidation. Check customer contracts and competitive norms before introducing one.
Is this legal advice?
No. It is a generic starting point. Customer-facing terms should be reviewed by counsel, especially where contracts, tax or regional rules apply.
How do I enforce it in the ERP?
Most distribution systems support freight rules by customer, ship-via and order value, but setup varies by product and version. Ask your administrator to configure the rules to match the written policy.
Netray can analyze how freight is actually charged and absorbed across your orders in the ERP, so you can tune the threshold with data.
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