How to Calculate Trucking Freight Rates: A Comprehensive Guide

Logistics and supply chain professionals understand the challenges of balancing cost management with customer satisfaction. This guide provides insight, knowledge, and some tools you may not have considered that can help you improve the accuracy of your operation’s freight rate calculations.

Factors Affecting Trucking Rates

Calculating trucking freight rates accurately requires an understanding of the different ways pricing is influenced throughout the freight process. While you may already have a handle on these, gaining a deeper and broader understanding of all of these aspects and how they collectively impact freight rates is your first step to making changes and improvements.

Distance

Put simply, the distance between Point A (origin) and Point B (destination) is the primary driver of trucking rates. The longer distance the higher the cost, though the per-mile rate might be lowered for longer hauls. When calculating freight rates, don’t just consider the total mileage of Point A to Point B, but also any potential route variations that could impact the final cost. Construction detours and weight limits can have a big impact on route variations, so those have to be considered.

Weight and Volume

Both the weight and the volume of whatever is being shipped factor into the rate. Heavier loads typically ship at higher rates due to increased fuel consumption, potential weight restrictions, additional permitting, etc. By the same token, oversized and/or bulky items that take up more space in a truck can mean additional charges. Miscalculations can be costly. To better optimize costs, consolidate shipments whenever possible and be sure you are precisely, accurately measuring weight and dimensions of all shipments.

Type of Freight

The type of goods being shipped also matters when it comes to rates. Some freight requires special handling, equipment, or certifications, which can be costly. For example:

• Perishable goods that need a refrigerated truck.

• Hazardous materials (HazMat) that require special permits and additional safety measures.

• Oversized or fragile items that require specialized equipment, extra care, or an accompaniment vehicle.

Fuel Prices

Fuel costs fluctuate constantly but make up a big part of trucking expenses. Many carriers include a fuel surcharge in their rate calculations to account for these fluctuations. The best way to handle fuel costs is to stay proactively informed about fuel prices and trends so that you can plan for and anticipate rate changes. Staying on top of what’s happening in with fuel prices can help you negotiate the best rates with your carriers.

Additional Fees

There are several other categories of special fees that may be part of calculating a trucking rate. Be sure to consider these when calculating freight costs:

• Tolls and highway fees.

• Permits for oversized or overweight loads.

• Insurance costs.

• Access charges, such as liftgate service, or inside delivery.

Methods of Calculating Trucking Rates

Once you understand all of the factors that can influence freight rates, consider the different ways freight costs can be calculated. Selecting the best calculation method may require running the numbers several different ways to find the most cost-effective option:

Cost-Plus Pricing

This is the base cost of the shipment plus a fixed percentage (markup) to cover overhead and generate profit. While this is pretty straightforward, cost-plus pricing may not properly consider market conditions or take into account what competitors are doing.

Mileage-Based Pricing

Mileage-based pricing is another common approach:

1. Determine the total mileage between origin and destination.
2. Multiply the mileage by a per-mile rate.
3. Add any additional fees or surcharges.

Spot Rates vs. Contract Rates

Spot rates means prices offered one time for immediate shipments. Contract rates refer to long-term agreements that are negotiated with carriers. Each can offer advantages. Spot rates can be lower during off-peak times of the year, or can be low based on current market conditions. Contact rates are more stable, which helps with budgeting and forecasting. Contract rates can also offer lower costs for high-volume shippers. Consider both your shipping volume and frequency of shipments when deciding between these two.

Tools for Calculating Trucking Rates

There are a couple of different options for calculating freight rates. Using the best tool for your shipments can increase the accuracy of your rate calculations:

Freight Rate Calculators

Online freight rate calculators can provide quick estimates after inputting basic shipment details. While these are good for quick estimates, they may not account for all the variables that can affect rates for specific shipments.

Software Solutions

Modern logistics management software platforms are designed to streamline and increase the accuracy of your rate calculations. This type of software is sophisticated and designed for the shipping industry, integrating multiple factors for each shipment, including incorporating historical data, and providing real-time market information.

Best Practices for Accurate Rate Calculation

Accuracy is everything. It informs customer satisfaction and directly affects your profit margin. Here are the most important practices in rate calculations to maximize accuracy:

Consistency in Data Entry

Consistency across data entry is incredibly important. Make sure everyone uses standardized formats for addresses, weights, and dimensions to minimize errors.

Regularly Updating Rate Models

With rates fluctuating all the time, staying current is extremely important. Regularly review and update your rate models to reflect changing market conditions, fuel prices, and carrier rates.

Using Reliable Data Sources

You need trusted data sources for your calculations to ensure precision in rate calculations. Make sure your data sources use current fuel prices, up-to-date carrier rate sheets, and any other frequently changing industry benchmarks.

Leveraging Technology for Optimal Rate Management

Planimatik offers innovative solutions designed specifically to help logistics and supply chain professionals better manage rates.

FTL: Historical Range Tool

For Full Truckload (FTL) shipments, Planimatik’s ‘Historical Range’ feature provides essential, data-driven insights, allowing you to compare new bids against a historical range of similar bids.

LTL: Save Quotes Feature

In the ever-changing Less Than Truckload (LTL) market, Planimatik’s ‘Save Quote’ feature lets you capture and secure LTL rates for up to four days. This provides stability in a fluctuating market.

Back Office Assistance

Planimatik’s Back Office Assistance feature is particularly useful for LTL freight quotes as they typically have unique specifications. Customize load details and receive expert guidance to ensure optimized rates and smoother, more efficient LTL shipments.

Calculating trucking freight rates requires a deep understanding of all the factors involved in setting that rate and using the right tools to calculate those rates. With solutions like Planimatik, you can get accurate freight rate calculations that are also competitive and aligned with your business goals and objectives.

Ready to take freight rate management to the next level? Sign up for a free demo of Planimatik’s freight management software today to learn how our cutting-edge solutions can streamline your rate calculation process, provide valuable market insights, and ultimately drive your logistics operations towards greater efficiency and profitability.