Freight shipping costs are essential for businesses involved in logistics and supply chains. With global trade expanding and the eCommerce industry growing at an unprecedented pace, understanding the elements that affect freight shipping rates has become essential. These charges are influenced by multiple factors, from the weight and distance of shipments to fluctuating fuel prices and economic conditions. For companies to stay competitive and manage costs effectively, a deep knowledge of these factors is crucial.
This blog will explore the key determinants of freight shipping charges and provide insights into how you can navigate these complexities efficiently.
Understanding Freight Shipping and Its Types
Freight shipping refers to the transportation of goods or cargo in large quantities via different transportation methods. These include airplanes, trucks, trains, or ships. It involves the transportation of goods from one place to another. It’s usually done for business purposes. Since freight shipping involves the movement of goods in bulk transported together, they are loaded on pallets or into large and strong containers and transported. Freight shipping is both safe and cost-effective, offering you the flexibility to choose from a variety of shipping methods.
Now, let’s look at the different freight shipping methods.
- Full truckload (FTL)
In FTL shipping, you use the full container to transport the shipment directly from the manufacturer to the fulfillment center. Most FTL containers involve 24 to 26 pallets.
- Partial truckload (PTL)
A partial truckload shipping uses 6 to 12 pallets. In PTL shipping, the chances of transferring the shipment from one truck to another during transit are low.
- Less than truckload (LTL)
A less-than-truckload shipping involves 1 and 6 pallets. LTL shipping is one of the most common methods for transporting freight. In LTL shipping, the shipment is often transferred onto different trucks on the way to the final destination.
- Intermodal
Generally, it involves the combination of truck and rail. However, it can also include a variety of transportation methods; ships in addition to rails and trucks as well. One of the biggest benefits of using rails to send your freight is that it reduces fuel consumption, significantly lowering shipping costs.
- Expedited
It’s mostly used for time-sensitive shipments. It often involves transportation via air and track. It is one of the most expensive freight shipping methods.
Exploring Different Types of Freight Charges
Here are the different types of freight charges
- Consignee collects
The consignee or the recipient of the freight is responsible for paying all charges upon receipt. They’ll also be required to pay any customs duties and taxes associated with the shipment.
- Prepay and add
Here, the seller will be responsible for paying all charges. However, they can charge the customer for reimbursement.
- Third-party logistics (3PL)
Instead of the consignee or the seller, the third-party logistics provider pays for all freight shipping charges.
- Cash on delivery
The carrier will collect the payment from the consignee at the time of delivery of goods. The payment is then forwarded to the shipper. It usually comes with an additional fees charged by the carrier.
- Free-on-board (FOB) origin
It means the consignee accepts the ownership of goods at the shipper’s dock. Here, the consignee will pay for all the costs associated with freight shipping.
- FOB origin & freight prepaid
It’s quite similar to the FOB origin above. However, the shipper will pay all the freight shipping charges when the ownership of the freight is passed to the consignee.
- FOB origin, freight prepaid, and charged back
The shipper is responsible for paying the freight shipping charges, while the consignee is responsible for the freight. However, the shipper must send the consignee an invoice for all freight expenses.
- FOB destination and freight collect
The title of the goods is transferred to the consignee as part of the FOB destination. The consignee is also responsible for paying all freight charges.
- FOB destination, freight collection and allowed
At the dock, the title to the goods is passed to the consignee, who pays the freight costs, and then deducts the freight charges from the seller’s invoice for the shipment.
The table below highlights the major components of freight charges for different freight shipping methods.
| Ocean | Air | Truck |
| Ocean freight (OCE) | Fuel surcharge | Truck freight rates |
| Bunker adjustment factor (BAF) | Security surcharge | Pick-up charges |
| Currency adjustment factor | Container service charge | Handling charges |
| Origin fuel surcharge (OFUE) | Customs clearance fees | Main leg charges |
| Origin terminal handling charges (OTHC) | Associated trucking fees | Delivery charges |
| Congestion surcharge (CON) | Airport screening fee | |
| Emergency risk surcharge (ERS) | Document creation fee | |
| Heavy lift (HEA) | Transport document amendment fee (AMF) | |
| Out of gauge surcharge (OOG) | Gateway transfer fee | |
| Peak season surcharge (PSS) | Messenger fee | |
| Special equipment surcharge (SPE) | Cargo insurance | |
| Hazardous surcharge (HAZ) | ||
| Suez canal surcharge (SUE) | ||
| Low sulphur charge (LSC) | ||
| Panama canal surcharge (PCC) | ||
| Aden gulf surcharge (ADE) |
Key Factors Influencing Freight Shipping Rates
Let’s look at the key factors influencing the freight shipping rates.
- Distance
The farther you need to ship your goods, the higher the cost. Longer distances require more fuel, resources, labour, etc., increasing the freight shipping charges. Moreover, challenges like geographical conditions, delivery to areas where it’s difficult to reach, transportation involving multiple carriers, etc., can further increase costs.
- Delivery speed
The speed of delivery is one of the most important factors that influence the cost of freight shipping. Though freight shipping ensures quick delivery, it comes at a higher price. The urgency of the delivery will further increase shipping charges due to the demand for faster and more reliable services. Slower delivery options are comparatively less expensive. However, you won’t always be able to meet customer demand, making them impractical.
- Transportation method
The transportation method you choose will directly impact your freight shipping charges. It’ll also impact how long the shipment takes to reach the destination, which will also influence the shipping rates. For instance, air freight is the fastest shipping method, ideal for urgent shipments. However, it comes with a higher price tag. Ocean freight, on the other hand, is a cost-effective solution for shipping bulk cargo over long distances. But it involves a longer transit time.
- Shipment size and weight
The bigger and heavier your shipment, the more it’ll cost you to ship it. Bulky and heavy shipments weigh more and take up more space. It means more fuel consumption, vehicle wear and tear, longer transit hours, etc. The carrier will also assess the density of the shipment to calculate the freight class. A shipment’s density refers to the amount of space it occupies relative to its weight. This can impact shipping charges.
- Fluctuations in fuel charges
The global fuel market is characterised by extreme volatility. Higher fuel prices will add to the operating costs of carriers. Eventually, the shipping charges will increase.
- Additional services
If you opt for additional charges, including insurance, special handling requirements for some goods, custom clearance, pallet removal, etc., it can add to the overall freight shipping charges.
Shiprocket Cargo: Affordable Freight Shipping Solution
Shiprocket Cargo is a tech-enabled solution to help B2B businesses with all their bulk and heavy shipment requirements. With a comprehensive B2B cargo shipping solution in a single place, you can streamline the entire process and elevate your business. It offers a wider reach, covering more than 24,000 pin codes across India. You can also optimise your supply chain processes with digitised B2B logistical solutions, featuring 14 carriers. Shiprocket Cargo offers a personalised cargo logistics solution at every stage of the shipping process. It specialises in the following services at affordable rates:
- Full truck load (FTL)
- Partial truck load (PTL)
- Air cargo
As a next-gen solution tailored specially for your business, you can take advantage of real-time tracking, AI recommendations to choose the best courier partner, and dedicated customer support round the clock.
It’s also a perfect solution if you want to delight your customers. With scheduled deliveries, time-bound deliveries, and email/SMS notifications to keep them updated, you can give them the ease and convenience of shopping online while keeping them updated.
Getting started with Shiprocket Cargo is easy. You just have to follow the three steps below.
- Create and upload bulk shipments through the Shiprocket Cargo dashboard
- Select a courier partner with the AI tool, based on factors, including weight, destination and more.
- Generate labels, prepare your packages, and hand them over to the chosen courier partner for delivery.
Conclusion
Freight charges are an integral part of the shipping and logistics landscape, and they can vary greatly depending on numerous factors, including weight, dimensions, fuel prices, and economic conditions. As businesses grow and markets expand, understanding these cost drivers can help you make more informed decisions, optimise logistics operations, and enhance profitability. You can manage freight charges efficiently, even in a rapidly changing global market by staying ahead of trends and collaborating with reliable carriers or logistics providers.
