Factors Affecting Freight Rates

6 Factors That Affect Freight Rates

Rates for freight transportation might seem like they’re calculated using some complex algorithm that makes little sense. However, there are several factors that impact the rates for LTL (less than a truckload) freight shipping. Here are 6 of those factors to help take the mystery out of freight transportation pricing:

1. Classification of freight – All LTL freight to be shipped must be assigned a freight class and appropriate NMFC codes (National Motor Freight Classification) based on the type of freight it is. Different types of freight classifications have different rates. This is why working with a knowledgeable freight broker is so important–they ensure your freight shipment has the correct classification and NMFC codes.

2. Distance of shipment – Generally speaking, the farther the distance, the higher the cost. Additional costs related to distance may be added if the shipment is going to an area the transport carrier doesn’t serve, and the shipment has to be transferred to a second carrier to get it to the desired destination. A good freight agent is your partner in keeping such switch-overs to a minimum.

3. Weight of freight – LTL freight weighs between 151 lbs. and 20,000 lbs. With such a large range, weight is calculated per 100 lbs. Generally, the more a shipment weighs, the lower the cost per 100 lbs. This creates a bit of a discount incentive for larger and heavier freight shipments.

4. Carrier base rate – Each carrier has their own base rate, which is calculated per 100 lbs. However, your freight broker may be able to negotiate the base rate for a particular shipment with a carrier if that carrier needs volume to create full truckloads on certain routes.

5. Absolute Minimum Charge – Every carrier has an Absolute Minimum Charge or AMC that is the lowest possible charge for that carrier. Many carriers increase their AMC over time, particularly if they have a high number of shipments at or close to the AMC because the carrier has greater costs for AMC shipments over larger, heavier shipments.

6. Added surcharges – Surcharges are added to freight rates for extra services or services beyond the standard dock-to-dock or business-to-business delivery. For example, a carrier may add surcharges for residential delivery (or pick-up), inside delivery, lift gate service, or delivery to a location with limited access, such as schools, churches, prisons and storage facilities. Additionally, fuel surcharges are typically added to every freight quote across nearly all carriers.

Many factors can affect freight rates. Some of these factors are set-in-stone, like classification of freight. While working with a reliable freight broker like ShipOnSite can help with other factors, such as choosing the right carrier for the distance of the shipment (one that goes all the way to the intended destination) or negotiating base rates with carriers who are keen to fill trucks on particular routes, to keep your freight rates as reasonable as possible.

Posted in Shipping.