Your business has loads of merchandise that must be shipped from one destination to another! After researching multiple freight forwarders and narrowing your options to two, you realize that company A charges a paltry $100. In contrast, company B asks for a whopping $500 to ferry the same consignment.
Like most people in your situation, your first instinct is that the second freight forwarder is trying to rip you off. Well, that may not necessarily be true.
Unknown to many, different factors affect freight forwarding rates. This article shall delve into five such aspects.
1. Distance and Location
Distance is perhaps the biggest factor that freight companies consider when quoting for their forwarding services. The further your consignment travels, the higher the shipping costs.
According to many trucking news, longer journeys translate to higher fuel consumption. Freight forwarders would then factor in the fuel markup when calculating the total amount charged for their services.
Besides, longer distances mean extended working hours.
Note that most truckers are paid based on the mileage covered. Again, those charges are passed on to clients.
Lastly, a longer journey could mean multiple modes of transportation. This is particularly true for imports, which may come into the country by air or sea before being shipped to the final destinations by road or rail.
Fortunately, you can implement certain tips to minimize high costs caused by longer transit times. One such strategy is sourcing your raw materials or finished products regionally to reduce the distance such commodities take to move along the supply chain.
Besides distance, your business location also affects how much you pay for your consignment to get there. For instance, businesses with warehouses in off-grid outposts may pay more due to accessibility challenges.
2. Transportation Mode
There are four different modes of shipment, namely air freight, sea freight, land freight, and rail freight. Each medium has its benefits and drawbacks.
Air freight is the fastest of the four options, making it suitable for perishable commodities and emergency supplies. However, it’s also the most expensive.
On the other hand, sea is the slowest but the most affordable of the four transportation modes. Besides, sea transport is ideal for freighting bulky cargo, such as heavy-duty industrial machinery.
The trick is to assess your business needs before picking the right transportation mode for your cargo.
If you’re importing goods directly from an overseas manufacturer, you may want to explore air or land transport. Road and rail transportation would serve you best for inland cargo ferrying.
In certain instances, you might consider intermodal shipping that combines two or more transportation modes. This is necessary where there’s a need to balance speed and affordability.
3. Freight Price, Size, and Weight
If you paid $1,000 to have an automobile shipped from an international automaker, you may be charged less than half the amount to have a refrigerator freighted from the same city. That’s because three factors are at play.
First, the two commodities have glaring price differences. Most cars easily fetch over ten times the cost of a standard refrigerator.
Besides, an automobile is certainly larger than a refrigerator, and in the freight industry, every cubic meter counts.
Lastly, the two imports vary significantly in weight and bulkiness. When shipped preassembled, a standard saloon car can consume up to five times the space of a more compact refrigerator.
Moreover, bulky items can increase fuel consumption and accelerate vehicular wear and tear. Both factors can inflate their shipping costs.
4. Fuel Costs
As you may have gathered by now, the prevailing fuel prices are a key determiner of freight costs.
Fuel prices vary significantly between countries, even if such nations share land borders. It all depends on the energy levies imposed by the relevant states. Therefore, it’s important to remember that when bringing goods from an overseas destination,
Even domestically, fuel prices can still fluctuate dramatically. That’s especially true if you’re shipping cargo from one state to another. Again, it has much to do with local tax laws.
What if you’re shipping goods interstate? Well, you’re not spared, either.
Pump prices aren’t always consistent statewide. Usually, the costs increase as you travel further inland or away from major fuel depots.
Remember that fuel costs also depend on the type of fuel used to freight your cargo. Gasoline (petrol) is relatively more expensive than diesel.
5. Seasonal and Economic Factors
Many other economic dynamics can influence freight costs. One such factor is seasonal variations.
Peak seasons usually experience a surge in shipping demand as people jostle to wow their dear ones with different gifts. For many businesses, the holidays present the perfect opportunity to restock or acquire new equipment.
According to the laws of demand, the surge in shipping demand can inflate freight rates.
Inflation is another major economic factor that can impact shipping costs. As inflation is marked by a steady increase in the price of goods and services, you can expect those dynamics to play out when negotiating freight costs.
Finally are supply chain disruptions. When planes are grounded due to adverse weather, the focus for international shipment would automatically shift to sea transport, potentially increasing the freight cost for sea vessels.
Final Word
Freight rates are ever fluctuating in response to the industry’s dynamics. To get the best deals on your next shipment, it’s imperative to familiarize yourself with the prevailing market rates based on the factors mentioned above.
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