The transportation costs are incomplete without the inclusion of freight charges. It is the price one has to incur to ship the goods from one area to another. Freight charges are variable and depend upon a variety of factors like the distance between two destinations, the bulk being delivered, accessibility, and even the fluctuations in the fuel prices. All these create a need to have an estimate of freight rates before you dive into deep waters. To request a free quote regarding freight queries, fill in your contact information.
The freight rates have skyrocketed in the past few years. According to a few reports, it is estimated that the freight rates have increased at an average rate of 8-15% from 2017 in the United States. The increase in freight rates is not absolute as the costs shall continue to rise even in the coming months. In such a situation, it becomes essential to get ahead of your competition with a smart and planner transportation strategy which not only offers you time and place utility but at the same time, does not put pressure on your profit margins or revenues.
The trends for freight rates in 2020 are bewildering. While the load volume and fuel prices have witnessed an upward trend, the truck capacity is low. The spot market loads have seen an upward trend for 2020 when compared to 2019 with a 115.9% increase. The spot market capacity, on the other hand, has witnessed a downfall with a decrease of 6.2%. Now, this trend is surprising because as per the trade pundits, truckload capacities decline during this month of the year. However, the supply chain disruptions caused due to the ongoing pandemic have pushed freight to the spot market. As a result of this, the capacity has become stiff since shippers and brokers have also reported an increase of 8.6% in terms of the load while at the same time, the postings for the truck were reduced to 8%.
The load to the truck ratio which is an important tool for predicting shipping costs has also increased across various segments. The van ratio in august was 5:2, an increase from July where it was 4:4. The higher rates were consistent with all the major segments including reefer, dry van, and flatbed. For flatbed, the ratio was 30.6 while the rate for the same was up by 13 cents and rounded up at $2.20 per mile.
After analyzing the various aspects of the current freight expenses, it can be inferred-
- The rates of the spot market have shot up
- One of the primary reasons for this increase in rates is the tightening of the spot market capacity
- The freight charges have increased considerably from the past year because of the COVID-19 which has pushed a greater load of freight to the spot market
- The total number of trucks drivers available has also gone down
- There is a need for smart packaging and expert assistance about how to continue with your profits without compromising the profit margins or increasing the cost
How to keep freight rates under control
If you are a trader or seller, you need to keep a check on the freight costs as a means to reduce your manufacturing and trading cost. Here are some simple ways to reduce the excess freight charges.
- Tweak the packaging
One of the most common reasons for an increase in freight costs is the bulk of load which is being delivered. At times, the volume of the load increases because of poor packaging. Do not go for shrink wrapping the items but use a blanket wrap instead. Moreover, the insulation is as important as the outer layer. A wooden crate would your best shot for full-proof packaging since it reduces the chances of damage during transit. While packaging, always packs your load for ground transportation. Hereby, your standard LTL service will not be including air-ride suspension trucks which means you can easily expect your stuff to bend or move during shipping. Hence, strong insulation can prevent you from incurring losses.
- Avoid breaking up shipments
The carriers that focus heavily on density or type of commodity, it would be advisable to consolidate the shipment and turn it into a partial or full-truckload one if the destinations are in the same direction. In addition to this, keep in mind the packaging materials and their weight too for they have a drastic impact on the freight charges most of the time. While filling the form containing information about your shipment, do not forget to mention the additional weight of your packaging materials.
The requisites for freight calculations for 2020
Freight rates change considerably due to multiple factors. While some of them are fixed, the rest vary from region to region. It is because of this reason that if you are in a venture where transportation forms the bulk of your business, it becomes necessary to calculate freight rates in advance to plan your expenses accordingly.
To and fro journey
You must have the accurate zip codes of the cities where your freight is shipping to and where it will go. In addition to this, you will also have to check if it is a business in a commercial zone or residential zone, if there is a loading dock, if you need an appointment, or if a liftgate is required or not.
Dimensions of packaged freight
Taking the dimensions of packaged freight and the weight of the commodities will also help you to calculate the rate beforehand since these factors do affect the freight shipping quotes. For this purpose, you can hire a service that has all these factors as presets. All you are required to do is enter the values in specific sections and you can have an estimate of the freight cost. The current year has been tough on major industries and transportation and logistics are no different. With the increasing freight costs, it is essential to have professional assistance so that you may not lose money on the trial and error method.