What Factors Influence Freight Rates?

Many individuals and processes came together to make each successful client delivery possible. The most obvious aspects of logistics are loading a product onto a truck and making a delivery, but there are far more complicated factors at play.

You get what you pay for in transportation, as with other things. Finding the ideal ratio of cost to service for each cargo is therefore crucial, but doing so is easier said than done. Shippers have a number of options for fulfilling deliveries, regardless of the type that needs to be made. Despite the differences between them, they all aim to deliver items on schedule and in good condition.

Shipping Price and Service

The way freight charges are computed for each shipping mode contributes significantly to the complexities of these decisions. The key to understanding freight rates is to understand the inputs that go into rate computations, the most important of which are mileage, transit time, fuel expenses, and accessorials. Large distances entail higher transportation costs since the amount of fuel, driver time, and other expenses are more due to the greater number of miles to be traveled.

The transit time of a shipment is the amount of time it takes to get from its origin to its destination. This is a key aspect for shippers to be aware of because each mode can have a varied transit time over the same distance. Distance and time are by far the most significant factors of shipping costs.

Fuel surcharges, which vary according to the market price of diesel, are another significant cost component. While this was not the case 10 years ago, it is now routine for carriers and other logistics service providers to raise and drop fuel surcharges on a weekly basis as gasoline prices fluctuate.

Accessorials are costs incurred during a shipment, such as detention or other special processing. These are often billed on an as-needed basis and are not included in a shipment’s base fee.

The influence of each rate cost aspect we’ve discussed varies based on the shipping method.

The following are the principal modes of freight transportation:

• Less Than Truckload (LTL)
• Truckload or Over-the-Road
• Intermodal

With so many alternatives, each with its own set of benefits and drawbacks, the difficult aspect for a shipper is determining which carrier and mode are appropriate for each package. Technology is certainly the greatest solution for any organization shipping more than a few shipments every day.

Freight rates and contracts can be complicated, making it difficult to calculate a single freight rate – more difficult when many carriers and mode alternatives are included. The simplest method to ensure that shipments are optimized for cost and service is to use logistics technology that can contain complex rate tariffs and assist with precise rate computations.

This technology is required for choosing the optimum shipping decision. It can, however, be costly. If your firm wants to optimize the shipping process, TransImpact offers decision support solutions that control the customer’s own carrier prices and ensure the optimum routing selections are made on every shipment.

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