Full truckload shipping rates are complex and difficult to calculate. Rates constantly fluctuate due to changing demand and capacity, and other variables – such as mileage and lead time – also factor into freight rates. Therefore, it is important for shipping coordinators to understand these variables – or to partner with a knowledgeable 3PL like Red Kite Freight Solutions who does – so they can make informed, cost-effective shipping decisions. Here are some of the key factors used to calculate truckload freight rates that all shippers should know.
Long-distance deliveries require more time and resources than short-distance deliveries, so carriers charge more for high-mileage deliveries. Long-distance trucking services typically start at 500 miles and above, so shippers can expect to pay a higher freight rate for a shipment across the country than a shipment to a neighboring city.
Diesel Fuel Price
To help cover fuel expenses, carriers typically include a fuel surcharge in their freight rates. Semi-trucks get anywhere from 4-8 MPG and can have a high per-mile fuel cost depending on diesel prices and distance traveled.
Let’s say, for example, a truck gets 6 MPG and diesel fuel costs $3.07. The average per-mile fuel cost ($3.07/6) for the carrier would be about $0.51. For a long-distance delivery of 500 miles, the carrier would pay $255 for fuel and likely pass along some of that expense to the shipper.
Fuel surcharges are based on the market price of diesel fuel and may fluctuate from week to week. As fuel prices go up, the surcharge will increase and as fuel prices drop, the surcharge will decrease. To track current national and regional diesel fuel prices, visit the U.S. Energy Information Administration website.
Whether or not a shipper’s delivery is along a high-volume lane – a route regularly serviced by a carrier that typically includes major metropolitan areas – also impacts freight rates.
Carriers dedicate many trucks to servicing their high-volume lanes, giving them the resources to transport multiple truckloads at a given time. This keeps costs down for shippers booking a load along a high-volume lane. Capacity is tighter for shipments delivered outside a high-volume lane, as carriers tend to dedicate fewer trucks to servicing these areas. The smaller truck supply makes these shipments more competitive and expensive for shippers to book.
High-volume lanes also have a higher chance of offering the carrier a return load. If a driver delivers outside a high-volume lane and has a low chance of having a return load, the carrier may increase freight costs to offset the time and miles spent driving to the next load. 3PLs can help shippers find transit within a high-volume lane to increase the chance of a return load and lower costs. Red Kite, for example, specializes in finding return loads for both drivers within and outside of high-volume lanes.
Type of Truck
Market demand, capacity and operational fees are different for each type of trucking service, contributing to different freight rates for reefer, flatbed and dry van services. Reefer and flatbed transit, on average, tend to be more expensive than dry van services due to the driver expertise and resources needed to transport loads like building materials or food and beverage products.
Shipment Lead Time
Lead times are important when booking a load. When a shipper provides a carrier with longer lead times, it gives the carrier more time to find a driver to transport the load. When a shipper provides a carrier with a shorter lead time, however, capacity is tighter, and the carrier may have more difficulty finding a driver to deliver the load.
Freight rates increase when capacity is tighter, so booking a load with a shorter lead time means a shipper will pay a higher freight cost than they would if providing a carrier with longer lead times. Shippers who partner with 3PLs, however, may still be able to keep freight costs down with a short lead time. 3PLs like Red Kite have connections with a variety of carriers and can use their relationships to find good rates in tight capacity markets.
Weight and Load Size
Weight and load size are also factored into truckload freight rates. Oversized loads, for example – loads that exceed a road or highway’s size and/or weight limit – require permits, experienced drivers and other resources. Carriers charge higher freight rates for oversized loads to cover the additional expenses associated with hauling them.
Any load that exceeds a road or highway’s size and/or weight limits is considered an oversized load. As a rule, loads over 46,000 lbs, wider than 8 ft. 6 in. or taller than 13 ft. 6 in. are considered oversized. Heavy equipment, like bulldozers or forklifts, is an example of a good that typically falls in the oversized load category.
Loads or deliveries that need specific actions or attention from a carrier – such as a delivery within a tight timeframe or a delivery of fragile goods – tend to require more time and resources. Carriers may charge a higher freight rate for the extra time and resources necessary to fulfill a shipper’s unique shipping needs.
Loads delivered to difficult receiving locations, including places without a loading dock, limited hours or congested loading docks, are more challenging and time consuming for drivers. As a result, carriers will usually charge shippers more for freight delivered to a difficult receiving location.
Market Conditions and Other Factors
Baseline freight rates are set based on market conditions and rise and fall as demand and capacity change. Higher demand and tighter capacity typically cause increases in freight rates, while lower demand and looser capacity lead to softening rates.
Economic conditions and manufacturing activity are some of the market factors that influence freight demand and capacity. When manufacturing activity is high and economic conditions are favorable, shipping activity tends to increase and as a result, freight rates are usually higher in a growing market. When manufacturing activity and the economy slow, so does shipping activity, and freight rates will decrease.
Red Kite publishes a monthly newsletter for customers that highlights shipping conditions, fuel costs and trucking outlooks to keep shippers informed about trends that could impact freight rates and capacity. Sign up to receive today!
Other outside factors that can impact freight rates include:
- Season: Some industries that use truck freight are season-oriented. For example, the agriculture industry tends to be active during summer, causing an increase in freight demand for agricultural goods. Because these goods are shipped on dry vans or reefers, capacity for these services tends to be tighter in the summer, leading to increased freight rates.
- Region: Trucking demand and capacity is different for each region of the U.S., leading to varying rates across the country. If capacity is tighter for flatbeds in the Midwest than it is in the South, for example, flatbed freight rates will be higher in the Midwest.
- Severe weather: Severe weather events like hurricanes or snowstorms can impact a carrier’s ability to deliver loads and tighten capacity, causing a temporary rate spike.
- Receiver rejecting orders: If a shipper sends a carrier to the wrong address or a receiving location that is closed, the carrier will have to return the freight to the shipper or to another facility. These shipping errors result in lost time and miles for drivers, and carriers will likely charge shippers for the wasted resources.
Finding the Best Freight Rate for Your Load
It can be difficult for shipping coordinators to find the best freight rate for their load, especially when their shipment requires a tight delivery frame or another specialized service. Partnering with a 3PL, however, can allow shippers to lower their freight costs. 3PLs have strong relationships with various carriers, which gives them the ability to negotiate freight rates to ensure their customers receive a competitive rate.
With a strong carrier network, Red Kite Freight Solutions can find a solution for your shipping needs, no matter how complex, at a fair, competitive rate. Our experienced team is committed to finding the most strategic and beneficial freight solution for each customer because when you thrive, we thrive.