Despite the size of the logistics and transportation industry, there is no standard for freight shipping costs. The process of obtaining an accurate freight shipping estimate is unexpectedly complicated due to the multitude of factors that affect the cost.
One of these factors is the regional nature of shipping, with certain carriers being more proficient in certain regions or shipping lanes. However, shipping costs can differ for various reasons, resulting in significant differences from the original freight quote provided by the broker.
Additionally, different carriers may offer varying freight rates, leading to different freight shipping cost estimates from multiple quotes.
The volatility of freight shipping costs is an ongoing issue that can have a significant impact on your company's bottom line. Therefore, it's crucial for logistics and supply chain companies to allocate a budget for freight expenses.
With shipping costs varying by as much as 50%, forecasting and preparing for changes can be a laborious task.
In this article, we'll explore the definition of freight shipping costs, key factors that can impact them, and their impact on your business.
Freight shipping cost refers to the charges that are incurred by a transportation company or carrier for the movement of goods or cargo from one location to another. These costs typically include expenses such as fuel, labor, equipment, insurance, taxes, and other operational costs that are associated with the transportation of freight.
Freight shipping costs can vary depending on a number of factors, including the weight and volume of the cargo, the distance and mode of transportation, and any additional services required, such as special handling or expedited delivery.
These costs are often passed on to the shipper or consignee as part of the overall cost of shipping goods. Most trucking companies can adopt fleet cost management tips to save on fleet costs.
In the last couple of years, there has been exponential growth in eCommerce. Retail spending in the US was boosted by the pandemic, leading to a surge in online shopping, which now constitutes 14% of the country's overall retail sales. Experts predict that this percentage might increase to 23% by 2023.
Although this has been a beneficial development for the transportation business, it has also posed several new challenges for most online retailers. The increased demand for online shopping caused a sudden boost in shipping costs, adding to the already existing burden on the global supply chain.
As a result, shipping delays have become rampant, and the cost of delivery and shipping has risen considerably. This issue is not limited to the US and is, in fact, a concern worldwide.
To help logistics and transportation companies estimate shipping costs, let’s explore some key factors that influence your freight shipping costs.
The cost of shipping a truckload of goods is typically calculated using a per-mile rate, known as a per-hundred weight charge, and fuel costs. This calculation is straightforward.
However, if you are shipping less than a truckload (LTL), the cost is based on the dimensions and weight of the freight. Weight rates are designed to be cheaper per 100 pounds for heavier loads.
Freight density, which is determined by the freight's weight and cubic feet, is the next factor that affects the shipping cost.
In order to calculate the freight costs, it is important to have knowledge of the freight density. Freight density can be determined by dividing the total cubic feet of the shipment by its total weight.
If the shipment is on a pallet, use the pallet's dimensions to calculate the freight density, and make sure to include the weight of the pallet in the total shipment weight. It is recommended to measure the longest side of the shipment, including any overhangs beyond the pallet.
Here’s an interesting fact: the type of freight being transported from one place to another and the type of trailer required to transport the freight also significantly impact the freight shipping costs. Some of the freight types include:
Dry van freight: This is the most commonly used trailer for shipping in the US, which does not have temperature control.
Reefer freight: Refrigerated freight requires temperature-controlled trailers to keep the goods at the appropriate temperature.
Flatbed freight: Flatbed trailers are used for large or bulky cargo that cannot fit inside a dry van and for goods that do not require protection from the weather, such as machinery or lumber.
Determining freight class can be a complicated process. The National Motor Traffic Association's National Motor Freight Classification book establishes 18 different classes, and each freight piece must be categorized within one of them.
Generally speaking, lower-class loads are less expensive to ship compared to higher-class loads. Various factors, such as product density, value, stow-ability, handling, and liability, are taken into consideration when determining class.
Loads that fall into a lower class typically have a higher density, are easier to handle, and are less prone to damage. Conversely, loads that are lighter and more delicate are typically assigned to a higher class, which results in higher shipping costs. Additionally, higher-class freight often takes up more space and requires more careful handling.
Have you ever wondered what the freight shipping costs would be from state to state? Generally, the rule of thumb is the greater the distance between the pick-up point and the final destination, the higher the freight shipping cost.
Regional carriers usually operate within a specific geographical area, and when they transport goods beyond their region, they often have to transfer them to another carrier that can deliver to the destination zip code.
This transfer process, known as interlining, can eliminate any discounts that might be available for shipping within a specific area, and additional costs may also be incurred.
Shipping rates increase in regions where fuel costs, especially diesel, are higher due to taxes, market factors, or other regional influences. Conversely, when fuel prices decrease, shipping costs should decrease proportionally.
In instances where fuel prices are unpredictable during shipment, carriers may raise their rates to protect themselves against abrupt fuel price increases.
Additionally, it's important to note that shipping between states can be more costly due to varying fuel rates. The fuel expenses in the shipment area may differ from the fuel expenses in your location because of differences in local and state taxes.
To estimate these expenses, some truckers use fuel surcharge calculators, which are typically included in shipping costs. Fuel costs can be reduced if companies adopt effective fuel management strategies and increase fuel efficiency.
Just like any other industry, the laws of supply and demand also impact the shipping industry. When the availability of truck space is scarce, carriers may charge higher prices for that space. Conversely, when shipping activity slows down, carriers may lower their costs to attract more customers.
Shipping costs are influenced by the demand for shipping services and the number of carriers operating in a particular area. Moreover, shipping rates may differ among various companies. Therefore, it is prudent to explore different options before making a final decision.
Despite what is commonly believed, the weather can have a significant impact on shipping and logistics. Whether it is at the starting point or the final destination, unfavorable weather conditions can cause significant delays and complications with an order.
Retailers are still charged by ports and transportation centers even when there are delays caused by unforeseen circumstances, which can affect customer satisfaction. This is also true for airlines, container ships, and trucking services.
The previous two years have introduced a new norm of experiencing interruptions in various forms. Whether it's due to weather strikes, shortages, or global pandemics, any of these disruptions can affect supply chains, which in turn affect transportation needs and freight shipping costs.
These inefficiencies lead to the need for redirecting deliveries, adjusting shipping needs, and additional challenges for fulfillment centers that are striving to fulfill orders. These disconnections pose difficulties for budgeting and result in higher freight rates at the last minute.
Every industry involved in manufacturing or selling physical goods depends on transportation to bring those products to the market. It is essential to have a reliable and efficient 3PL transportation services partner and transportation management system (TMS) to meet the high demands and keep freight shipping costs low.
Thankfully, LoadStop TMS offers an extensive one-window smart solution to meet your transportation needs. From load sourcing to load planning to dispatch management to load tracking to fleet management to reporting and analytics, LoadStop TMS covers everything while simplifying complex trucking operations, increasing your bottom line, and reducing freight shipping costs
Sara Naveed is a creative and digital content writer who uses her creative skills to develop and edit professional web content. Being a writer has always been her dream. She earnestly hopes people appreciate her writing—an asset she deeply covets. Using her 8+ years of working experience, she writes for trucking industry experts who are always looking for better technological solutions to their problems.
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