RTO cost = shipments × RTO rate × cost of one return. The cost of one return is the forward freight, plus the return freight, plus anything lost on the parcel itself. The calculator above does the sum for a month and a year, and shows the saving from a lower RTO rate.
What RTO is
RTO (return to origin) means a shipment could not be delivered and is sent back to the sender. It usually follows one or more failed delivery attempts, each reported as an NDR.
The formula
Monthly RTO cost = monthly shipments × RTO rate × (forward freight + return freight + other loss)
| Input | What to enter |
|---|---|
| Shipments per month | Everything you dispatched, prepaid and COD together |
| RTO rate | Returned shipments ÷ dispatched shipments × 100 |
| Forward freight | Your average cost to send one shipment |
| Return freight | The return charge on your carrier's rate card |
| Other loss per return | Packaging, handling, damage and COD charges you still pay |
Worked example
- 1,000 shipments a month at a 15% RTO rate = 150 returns.
- Each return costs ₹60 forward + ₹50 return + ₹20 other = ₹130.
- 150 × ₹130 = ₹19,500 a month, or ₹2,34,000 a year.
- At a 10% RTO rate it would be 100 returns and ₹13,000 a month: a saving of ₹78,000 a year.
These figures are an example. Use your own freight rates; the calculator doesn't assume any carrier's prices.
What the calculator leaves out
- The margin on the sale that didn't happen.
- Stock that is stuck in transit and can't be sold.
- Staff time spent chasing returns and answering the client.
So the true cost is higher than the number above, never lower.
Bringing the number down
Most returns begin as a failed delivery that nobody acted on in time. Our guide on how to reduce RTO covers what to check before dispatch, in transit and on every NDR. Courier agencies use Hyper Route to see failed deliveries across every carrier in one place and act the same day: see NDR and RTO management.