April 25, 2023
Freight & Logistics -
Understanding Freight Rates: A breakdown of the various components that make up freight rates | OneLink Holdings
In this blog post, we provide a comprehensive breakdown of the various components that make up freight rates, including fuel surcharges, accessorial fees, and dimensional pricing. By understanding these factors, shippers and logistics professionals can make informed decisions about their shipping needs and optimize their supply chain operations to manage costs effectively. If you’re looking to improve your shipping budget and stay ahead in the freight and logistics industry, this blog post is a must-read.
Freight shipping is an essential component of the global economy, but it can be a complex and costly process. One of the most important factors in determining the cost of freight shipping is the freight rate, which is the price charged for moving goods from one location to another.
Understanding the various components that make up freight rates can help shippers and logistics professionals better manage their shipping costs and improve their supply chain operations. In this blog post, we’ll break down the different factors that contribute to freight rates, including fuel surcharges, accessorial fees, and dimensional pricing.
Fuel Surcharges
Fuel surcharges are one of the most significant factors in determining the cost of freight shipping. These charges are added to the base rate of shipping to cover the cost of fuel and fluctuate based on the current price of fuel. Fuel surcharges are typically calculated as a percentage of the base rate, with higher surcharges applying to longer shipping distances or heavier shipments.
Accessorial Fees
Accessorial fees are additional charges applied to a freight shipment for services beyond standard pickup and delivery. These fees can vary widely and can include services such as inside delivery, liftgate service, storage, and special handling. Accessorial fees are typically charged on a per-occurrence basis, and shippers may not be aware of these charges until they receive their final invoice.
Dimensional Pricing
Dimensional pricing is a relatively new pricing structure used by some carriers that calculates the cost of shipping based on the size and weight of a shipment. This pricing structure takes into account the amount of space a shipment occupies in a carrier’s trailer, rather than just the weight of the shipment. This means that larger, lighter shipments may cost more to ship than smaller, denser shipments.
Pickup Charges
Pickup charges are fees that are added to the base rate of a shipment to cover the cost of the carrier picking up the shipment from the shipper’s location. This can include the cost of labour, fuel, and other expenses associated with the pickup. The pickup charge may vary based on factors such as the distance to the pickup location, the size and weight of the shipment, and the time of day or week when the pickup is scheduled.
Handling Charges
Handling charges are fees that are added to a shipment to cover the cost of additional handling or processing required for the shipment. This can include services such as sorting, labelling, palletising, or repackaging. The handling charge may vary based on the specific requirements of the shipment and the carrier’s pricing structure.
Drayage
Drayage is a term used in the shipping and logistics industry to refer to the transport of goods over a short distance, typically between a port or intermodal facility and a nearby destination. When you receive a freight quote, a drayage charge may be included to cover the cost of transporting your goods from the port or intermodal facility to their final destination. The drayage charge can vary based on several factors, including the distance between the port and the destination, the type and size of the shipment, and the carrier’s pricing structure.
Terminal Handling Charge
A Terminal Handling Charge (THC) at destination is a fee charged by the carrier to cover the cost of handling a shipment at the destination port or terminal. When you receive a freight quote, a Terminal Handling Charge at Destination may be included to cover the cost of handling your goods at the destination port or terminal. This fee can vary based on a number of factors, including the size and weight of the shipment, the type of cargo, the location of the port or terminal, and the carrier’s pricing structure.
Other Factors
In addition to these primary factors, there are many other factors that can contribute to the cost of freight shipping. These can include the mode of transportation, the distance travelled, the type of cargo being shipped, and the time of year. For example, shipping during peak seasons or during times of high demand can lead to higher rates due to limited capacity.
In conclusion, understanding the various components that make up freight rates is essential for managing shipping costs and optimizing supply chain operations. By taking into account fuel surcharges, accessorial fees, and dimensional pricing, shippers can make informed decisions about their shipping needs and negotiate better rates with carriers.
At the same time, it’s important to stay up-to-date on the latest industry trends and carrier pricing structures to make the most of your shipping budget. Whether you’re shipping domestically or internationally, understanding freight rates is critical to the success of your supply chain operations.
Written By
OneLink Holdings team
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