Understanding how shipping works can be tricky. Whether you’re an expert in logistics or a business owner trying to improve your supply chain, knowing what affects shipping costs is really important. In this guide, we’ll break down the top ten things that make shipping cheaper or more expensive.
10 Factors that affect freight shipping costs
Distance & Location
The distance between where something starts and where it’s going is super important when it comes to how much it costs to ship. If it has to travel a long way, it usually costs more. And depending on where exactly it’s going and how easy it is to get there, the price can go up even more. Places that are hard to reach or don’t have good roads or transportation options can make the cost go higher because it’s tougher to get stuff there.
Freight Class & Density
The next thing that matters for shipping costs is how heavy something is and what class it’s in. Your freight class is like a label that tells how much it costs to ship. It’s set up by this group called the National Motor Freight Traffic Associates to make things easier for shipping companies. This system helps everyone agree on prices and makes it easier to talk about shipping. It’s based on four things:
- If it’s easy to handle or not.
- Density of the package.
- Risk associated with it.
- Packing process is easy or tough.
If something is really heavy or in a higher class, it usually costs more to ship because it takes more work to handle and store it.
Another big thing that affects how much it costs to ship something is how much space it takes up compared to how heavy it is. This is called density. Basically, it’s the weight of the space your stuff fills up. Figuring out the density helps decide what kind of shipment it is and how much it’ll cost to send. So, knowing how dense your stuff is can really change how you handle your shipping.
Mode of Transportation
The way you choose to ship your stuff can really change how much it costs. You can pick different methods like truck, train, plane, or boat, and each one has its own price and things to think about. If you have a lot of stuff to send, using a whole truck (called full truckload or FTL) might save you money. But if you only have a little bit, using less than a whole truck (called less than truckload or LTL) can be more flexible, even though it might cost more for each piece of stuff.
This also depends on how much stuff you’re sending and how fast you need it to get there. If you need it there right away, you can choose fast shipping. But if you’re okay with it taking a little longer, you can pick slower shipping.
Here are four main ways:
- Full truckload (FTL): You need the whole space in the truck.
- Less than truckload (LTL): It is used when your stuff doesn’t fill the whole truck. Thus the carrier might put other people’s stuff in too, but it might cost more because of extra handling.
- Partial truckload (PTL): Like LTL, but with stuff going to the same place, so the carrier can fill up the truck better.
- Intermodal: This mixes different ways of shipping your stuff.
So, picking the right shipping method can save you money and make sure your stuff gets where it needs to go on time.
Fuel Prices
Changes in fuel prices have a big impact on how much it costs to ship things. Fuel is one of the main expenses for companies that move stuff around, like trucks, planes, and ships. So, when the price of oil goes up or down, the cost of shipping can change too. To deal with this, shipping companies might raise or lower their rates to cover the extra cost of fuel. They might also add extra fees called fuel surcharges.
If you’re shipping things within the same country, you need to know that shipping from one state to another can also affect how much it costs. Each state has its own taxes on fuel, which can change how much you pay for shipping. So, it’s important to think about these extra costs when you’re planning your shipping budget.
Market Demand & Capacity
Shipping costs can go up or down depending on how much demand there is and how much space is available for freight. When there’s a lot of demand, like during holidays or busy times, rates tend to go up because there’s limited space and lots of competition for it. On the other hand, if there’s plenty of space and not a lot of demand, prices might drop. Additionally, changes in supply chain dynamics and demand can also impact shipping costs. If there’s limited space available for shipping, carriers might charge higher rates. Conversely, during slower periods, prices may decrease.
Accessorial Charges
Accessorial charges are extra fees that come with shipping services besides the usual transportation costs. These charges can cover things like:
- Using a lift to move heavy items.
- Delivering inside instead of just to the door.
- Fees for keeping the truck waiting, or charges for delivering again if the first attempt failed.
Forgetting to consider these charges can lead to unexpected expenses and make shipping costs higher than you planned.
Packing & Handling
Using smart packaging and handling methods can help lower shipping costs. As it reduces the chance of things getting damaged. Therefore helps in making the most of the space available, and cutting down on the need for extra labor. Picking the right materials for packaging, organizing things well on pallets, and following the rules set by the carrier can all help make shipping cheaper and more efficient.
Weather Conditions
Changes in the weather and different seasons can mess up how things move through the supply chain. Therefore, making shipping more expensive. Bad weather like hurricanes, snowstorms, or floods can slow things down, change the routes that shipments take, and make it more likely that things will get damaged or lost. So, it’s important to have backup plans and ways to reduce the risks when bad weather hits.
Regularity & Compliance Documentation
Making sure you follow all the rules and do all the paperwork required by regulations is super important to avoid getting fined, facing delays, or ending up with extra shipping costs. This means sticking to customs rules, getting the right permits, and filling out shipping forms like bills of lading and certificates of origin correctly. Doing all this stuff right is crucial for making international shipping go smoothly and not costing more than it should.
Technology & Optimization
Using technology and automated tools can make shipping easier. These can help see what’s going on better, and use your resources more efficiently. As a result the shipping costs goes down . Tools like transportation management systems (TMS), software that figures out the best routes for shipments, and tracking systems that show where things are in real-time can all help businesses make their supply chain work better and save money.
Conclusion
In conclusion, the cost of shipping is affected by distance, freight weight, market demand & seasonal variations. By knowing about these factors and finding ways to lower costs, businesses can make their supply chain work better and compete better in the world market.
At MOVD, we aim to provide our customers with all the information they need about shipping costs and estimates, so they can always be one step ahead in the game.