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Freight rates refers to the price
of shipping a specific cargo from one location to another.
And your freight shipping company
can’t always give you your all-in cost if you don’t give them all the pertinent
data for the load. That’s why you must understand the fees and
costs included in the freight rate.
Shipping costs are hard to predict
and can significantly impact the bottom line. So, how do you calculate the
freight rate? Or, are there any factors that affect these costs?
Well, read on to find out.
Factors Affecting Freight Rates
Weight Of The Shipment
Be it freight shipping or standard
shipping, the weight of the shipment is one of the most important factors
affecting the freight rates.
In the case of freight shipping,
generally, the rates are cheaper when it comes to shipping price per 100lbs.
This creates a bit of discount incentive for heavier and larger freight
With the shipment weight increases,
it moves to the next shipment group. Once in the next shipment group, the
weight is considered in the lowest weight category in that specific
Therefore, the weight corresponds
to the corresponding shipping costs for that particular group.
The Density Of The Shipment
By calculating the density of
shipments it allows carriers to maximize the load capacity of their
trucks. It also offers them another metric
to offer freight rates for specific shipments.
Density is calculated by multiplying the overall width x height x length
and dividing it by the total weight of the shipment.
Freight class is yet another factor
affecting the freight rates. There are currently 18 freight classes ranging for
class 50 to class 500. The higher the
freight class the more the over-all freight rate will be per shipment.
Freight classes are defined based
on the shipment’s density, its weight, the complexity of handling and delivery
requirements. Considering these factors, the shipping rates will be lower for freight
with a lower freight class that has less handling and delivery requirements.
Along with freight class, freight
must be assigned an appropriate NMFC (National Motor Freight Classification)
code based on the type of the freight.
So, it is important that your
freight broker makes sure your shipment has the right NMFC codes and
classification. If you need assistance calculating your freight class and/or
NMFC code please do not hesitate to call us.
Distance Between Origin And Destination
In general the longer the distance
between the Origin and Destination the higher the cost of shipping will be. But
shipping rates may vary from place to place depending on capacity and complexity
of pick-up and delivery locations.
Moreover, additional cost related
to the distance may be added if the carrier doesn’t serve the destination area,
and the shipment has to be transferred to another carrier.
Look for a freight agent who keeps
such switch-over or inter-lining to the minimum if possible.
After selecting the freight class, the next thing you’ll want to know is how quickly you want your shipment to reach to the destination. Expedited Freight Shipping can be used for faster delivery, but the rates will be higher. Where as Consolidating Carriers can be used if you are trying to keep freight rates low and you have some flexibility of when the shipments deliver.
The cost of freight is, of course, in
large part tied to the fuel cost. With the decrease in fuel prices, freight
rates also go down. Shipping carriers may choose to take the cost of the fuel
or reduce the amount so that the shipping rates are cheaper while achieving
Tariff And Negotiated Rates
Shipping costs depend on the type of shipping charges you get from the carrier. Therefore, if you opt for tariff fares or negotiated shipping rates, your shipping costs will vary. So, it is better to contact third-party logistics company (3PL).
They could get you price
negotiation that you might not be able to get in the first place.
Easy Logistics Management Takes the Guesswork Out Of Calculating Freight Rates
Freight rates can vary widely depending
on the carriers and/or 3PL’s you choose. By leveraging our powerful freight
management software, you can greatly simplify your logistical process. Our easy
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rates in USA, Canada, and Mexico for Volume, LTL, Partial, Full Truckload, and
Air Freight Shipments. You also get
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Here are some other great resources we have found and referenced in writing this article. Should you want to understand how freight rates are calculated further! Enjoy!