Freight rates are constantly changing but one thing remains the same: the impact on your bottom line. Budgeting for freight transportation services is essential for any supply chain and logistics company. Freight rate is a price at which certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport (truck, ship, train, aircraft), the weight of the cargo, and the distance to the delivery destination. Many shipping services, especially air carriers, use dimensional weight for calculating the price, which takes into account both weight and volume of the cargo.
Here are the factors that affect freight rates.
1. Flexibility and speed
Over the pasyt years, delivery turnaround times have shortened to unprecedented levels. Same-day and overnight deliveries are now an expectation, so flexibility around deliveries is tough, but it can have a significant impact on your freight rates. When planning for deliveries, it’s imperative to optimize routes, reduce idle time for drivers and try to increase deliveries to specific locations (instead of multiple stops per week).
Working with an experienced third-party logistics (3PL) can help with creating opportunities for flexibility and speed. Identifying areas that could be more efficient and increasing speed through route optimization are just a few factors that logistics providers can help improve, increasing your delivery speed and saving you money.
2. Weight and density of the shipments
Weight and density impact freight class, which in turn, impacts freight costs. The bigger the package, the more density, the more room needed for transport. Whether shipping by land, air or sea, the more room and manpower needed to transport your goods, the more you’re going to pay for it.
To mitigate costs, ensure the use of high-quality, low-weight packaging and work with shippers of choice. Shippers who provide excellent customer service and efficiency for their transportation partners often see better rates from carriers and recurring business opportunities. While we are on the topic of packaging, check out our custom packaging services!
3. Distance
For a general rule of thumb, the longer the distance between the original pick-up point, typically a fulfillment center, and the final destination, the higher the shipping cost. But freight rates also depend on geographic location, transportation move, capacity, and complexity of the delivery. Experienced 3PLs can help strategize the best way to minimize cost due to distance. Adding fulfillment centers to areas where you deliver most frequently, cutting down on the number of deliveries to outlying areas, and holding deliveries until trucks are at full capacity are all ways to help cut freight costs and maintain your overall transportation budget.
4. Seasons
Seasonal trends have a huge impact on freight costs. With higher demands, come higher costs. When transportation becomes a high priority, rates naturally increase. To avoid blowing your freight budget, it’s imperative that supply chain companies forecast as accurately as possible from previous years. Establishing a relationship with your freight provider for brokerage services or using a trusted 3PL to manage transportation rates will help maintain your budget while fluctuations in the market occur.
5. Disruptions
Weather strikes. Shortages occur. Pandemics hit. Any of these disruptions impact all supply chains and, subsequently, transportation needs and freight costs. These inefficiencies result in rerouting deliveries, adjusting shipping needs, and further fallout for fulfillment centers working diligently to fulfill orders. These disconnects create obstacles for budgeting and increase freight rates in the final hour.
