What’s the single biggest factor influencing shipping costs? How much the freight weighs? How far it’s going? Whether it’s moving by air or ground transportation, calculating freight is a complex combination of all of the above and more. If you want a better understanding of how freight rates are calculated, here’s what you should know.
A freight rate is the cost of transporting cargo, influenced by factors like freight class, distance, weight, and transport mode. As a third-party logistics provider, we help negotiate favorable rates and optimize shipping, enhancing efficiency and profitability.
What Is a Freight Rate?
It sounds like fancy industry speak, but a “freight rate” is simply the cost of transporting cargo from one location to another. These rates vary by carrier and depend on a variety of factors, including shipping distance and weight.
For many businesses, especially those reliant on physical goods, freight rates represent one of the biggest operating expenses. Efficiently managing these costs helps maintain profitability and competitiveness in the market. Freight costs can often be negotiated, allowing your business to seek the best deal possible.
How Are Freight Rates Calculated?
Freight costs are influenced by several key factors, including:
- Freight class
- Weight
- Dimensions
- Destination
- Urgency
- Extra charges
These primary factors help determine the final cost of transporting goods from one point to another.
Freight class
Freight class is also known as the National Motor Freight Classification (NMFC) code or NMFC classification. It significantly affects the cost of freight and is crucial for understanding shipping costs.
Freight class is determined by factors such as:
- Density
- Liability
- Handling
- Stowability
In this case, liability refers to whether your freight needs extra security. Handling is the need for special equipment while stowability refers to whether it can fit with other freight or not.
Freight classes range from 50 to 500, with higher numbers indicating more expensive rates, but the logic can be counterintuitive. For example, if we were to ship ping pong balls, they would have a 500 freight class due to being lightweight but large in volume.
The dimensional weight reflects the space a package occupies relative to its weight. This ensures that trucking companies cover their costs even for light but bulky items.
Weight
Most people are familiar with heavier shipments costing more to transport, so it shouldn’t be a surprise that weight is a key factor for freight rates. For example, if you’re shipping two boxes of automotive parts with identical dimensions, the heavier box will cost more to ship. This principle ensures carriers cover the increased fuel and handling requirements associated with heavier loads.
Dimensions
Dimensions significantly impact freight rates, especially for less-than-truckload (LTL) shipments. While often less considered than other factors, the size and shape of a package can greatly influence freight costs. Bulky, awkward packages take up more space, reducing the overall capacity of the truck, so carriers charge more to offset this inefficiency.
For instance, mattresses are rolled up and vacuum sealed for shipping because a compact, manageable box is easier and cheaper to transport than an unrolled mattress of similar weight. This dimensional consideration ensures optimal space utilization and cost-effectiveness in freight shipping.
Destination
The destination plays a crucial role in determining freight rates. Consider rural areas near us in the Southeast like Morristown, Lenoir City, or Loudon as an example. More than just the miles required to get there, reaching a rural area is inherently more expensive because carriers have fewer deliveries in these locations.
In contrast, delivering to an urban area like Knoxville or Savannah with many deliveries is more cost-effective. This is because carriers can consolidate shipments and optimize routes in cities, reducing overall costs. Consequently, the freight rate is higher for rural deliveries to offset the inefficiency and additional expenses of reaching less accessible destinations.
Urgency
Urgency has a significant impact on freight rates. Next-day shipping, for instance, is more expensive due to the need for faster, often air-based transportation rather than ground. You know this as a consumer if you order one-day shipping vs. standard shipping for your Amazon package.
This expedited service drives up costs because air transport involves:
- Higher fuel prices
- More complex logistics
- Quicker turnaround times
The increased demand for speed and reliability in urgent deliveries necessitates additional resources and coordination. This results in higher shipping costs compared to standard options.
Extra charges
Extra charges, often called “accessorials” in the industry, are anything that involves additional labor or time outside of a regular pick-up and drop-off. Examples include:
- Out-of-route mileage
- Shipping hazardous materials
- Delivering to locations without a loading dock
These situations require extra resources, such as specialized training, specialized handling, equipment, or additional driver time, leading to increased costs. As a result, the cost of freight rose to account for these extra demands. This ensures that carriers can cover the additional expenses and logistical complexities involved during shipment.
How a 3PL Can Help
A third-party logistics provider (3PL) can assist your company with freight rates by leveraging their expertise and industry relationships. They negotiate favorable terms due to their aggregated shipping volume, securing volume discounts that individual businesses may not achieve alone.
3PLs offer expert logistics management, suggesting optimal carriers and multi-modal routes for cost savings. They strategically position fulfillment centers closer to end users, reducing shipping distances and costs.
Ultimately, partnering with a 3PL removes the administrative burden of managing freight logistics. This allows your business to focus on core operations while benefiting from efficient and cost-effective shipping solutions.
Do More with R&S
We offer comprehensive solutions for freight rates, logistics, and trucking. Our extensive network and industry expertise provide competitive costs tailored to your specific needs. Our logistics services ensure efficient planning, coordination, and management of your shipments, optimizing routes and reducing transit times.
We provide real-time updates, transparency, advanced tracking systems, and a customer-centric approach. We’re watching your shipments as if they were our own – that’s our value of stewardship in action. This enhances your overall supply chain efficiency and customer satisfaction.
Freight class, weight, dimensions, destination, urgency, and extra charges are all factors that affect the cost of freight. This makes it essential that your company practice efficient cost management when dealing with physical goods. Nobody wants to waste money on inefficient shipments. We want to be a resource to help you save time and save money. Contact R&S Logistics to optimize shipping to boost efficiency and profitability.
