Freight transport: what you need to know to reduce your costs
As a logistics and transport manager, perhaps the price of transporting your goods has always seemed to you to be unclear. No matter how hard you try to understand your invoices, your carriers seem to apply fairly tight calculation methods.
You are not the only one: most companies “suffer” from these tariffs without really understanding them.
Find out in this article, written with the help of the MyXBorder team- specialist in delivery from Amazon India to USA , to better understand the quotes and invoices of your carriers.
As a bonus, also take the time to consult 6 tips for shipping your packages at a lower cost, without compromising on the quality of your shipments.
How is the price of the transport of goods calculated?
You can imagine: the calculation of the price of transporting your goods varies from one mode of transport to another.
However, these transport prices are also set by two complementary approaches:
- On the one hand, there is the operational logic of the operating costs incurred by carriers, which leads them to calculate their final transport tariffs after applying a margin.
- On the other hand, some players in the messaging world take a different approach with a “commercial” pricing logic that consists of pricing according to customers (called, in the transport world, “shippers”). These customers are bound to seek the best freight rates for their container, pallet, parcel or even bulk freight shipments.
So how do you understand how your parcel delivery costs are calculated?
Transport costs in the world of sea freight and air freight
The world of sea and air freight is a world in which many commissioners and agents work. In short, as a customer, you often go through companies that themselves buy transport from other transport companies. The consequence? As the sender, you often pay more.
What is more, these two modes of transport are the most subject to market volatility . Indeed, many parameters can have an impact on the calculation of the price of sea or air transport: the current geopolitical context, economic conditions, or even exceptional events (such as, recently, the Covid-19 health crisis).
Knowing this, we still know the basis for calculating the transport costs of these modes of transport: both apply the principle of billing by volumetric weight. Simply put, volume weight is a method of calculating a dummy weight by relating the actual weight of the commodity to its volume.
- Carriers in the air freight world apply a 1: 6 weight / volume ratio, always to their advantage.
- The carriers of the sea freight world calculate their prices on the basis of a tariff of 1 ton per 1 m3 (meter cube).
Our advice? On the one hand, reserve air freight, the most expensive but also the fastest mode of transport, for perishable and light goods that you need to ship over long distances. On the other hand, reserve maritime transport for non-perishable goods, in large quantities, already packaged, to be transported over long distances.
Transport costs in road freight
For calculate the cost of transporting your goods, road hauliers take into account multiple criteria, which fall into 3 categories:
- The Kilometric Costs, which they multiply by the total number of kilometers to be traveled to give you a price. These costs include in particular the price of the fuel used, the maintenance of the vehicle fleet, the wear of the tires, as well as any tolls on the journey.
- Driver Costs , including in particular the remuneration of drivers, employer contributions, or drivers’ travel allowances.
- Daily Charges, which include the price of the material itself, insurance, tax, as well as all the costs of managing the transport company.
These criteria are interesting if you want to understand how the price of the transport of your goods is calculated, or if you want to internalize your road transport of goods, by creating your own fleet of trucks.
However, if you choose to use road transport companies, be aware that they also take into account other costs to offer you their prices:
- Potential additional insurance , especially if you want to transport expensive or fragile items, or dangerous materials.
- The volume weight of your packages , again, for express or international transport shipments, and with many carriers.
Transport costs in road and express courier services
The principle of the courier is simple: instead of carrying out transport one by one, the transporter organizes itself to collect all the shipments of its customers in a geographical area, then groups them together on a local / regional platform, to finally carry out links to another regional agency (from the same country or not). This includes, in the middle, a passage on a central hub, to then carry out a distribution round.
In short: the carrier’s objective is to massify the flows of all its customers with a view to rationalizing costs .
Consequently, the calculation of the transport prices applied by courier (parcels or pallets) can be partially decorrelated from the real costs, because they are shared between a multitude of customers.
The consequence is that carriers can decide to apply significantly different rates from one customer to another .
In fact, the more a customer has large volumes, the more the transporter will be able to apply low transport rates to him, even if it means earning little money with this customer, who will have the merit of filling the trucks and platforms.
On the other hand, for a smaller customer, the transporter may decide to apply higher transport tariffs in order to profit from these flows.
In short, the pricing of courier freight transport varies greatly depending on the monthly volumes consumed and the price negotiations carried out with the carrier.
6 ways to reduce your freight transport costs
Now you know how carriers set their rates. Now discover a series of tips to influence the transport prices offered by your service providers , and ship smarter.
For occasional shippers: Compare rates
As with every activity in the world of logistics, it is recommended to compare the transport prices offered to you by the different companies. Whatever mode of freight forwarding you wish to use, use the Internet to compare the offers of different carriers .
To reduce the price of a shipment: Anticipate the deadlines!
It’s a fact: the faster a shipment, the more it costs you . The difference is particularly marked when comparing air transport and maritime transport. Likewise, express transportation is more expensive than economy transportation.
Thus all the major express carriers ( DHL, FedEX) offer, in addition to their usual air express services, lesser-known economic services with specific names: Classic, Economy or Standard .
So be sure to anticipate your shipping schedules, to benefit from more advantageous shipping rates.
For shipments of several packages: Group your shipments
If you send several packages to the same address, rather than opting for separate packages, and therefore billed separately, opt for a so-called “multi-package” transport offer.
The principle is simple: the carrier will invoice you only once on the basis of the total weight of the different packages sent, rather than multiple times on the basis of a single package. Thus, the price of a multi-package shipment is necessarily more advantageous than the sum of the prices of several packages .
For all your shipments: Eliminate the void in your packages
You’ve read it before: carriers don’t just charge you on the basis of weight. They now almost all take volume into account. This is called volumetric weight billing.
There is only one solution to avoid being penalized by this pricing principle: opt for packaging the size of which corresponds as closely as possible to that of the product you are shipping . This will limit the vacuum, reduce the amount of dunnage product to be used, but above all you will avoid overpaying for transport.
To optimize this weight-volume, several smart packaging solutions are available:
- Opt for pouches (standard or large capacity) for your less fragile products . Very light, but robust, they make it possible to avoid over-packing products that do not require great protection.
- Select extra-flat cases or boxes for your flat products . Just as protective as traditional boxes, they considerably reduce the weight-volume of your shipments.
- Choose height-adjustable crates for your larger products . With easily cut grooves with a cutter, these boxes adapt to the necessary height to protect your goods as closely as possible.
For businesses: Check your invoices
Being able to send packages or pallets at low transport rates is the goal of any business. But you also need to remember to look and compare the many surcharges charged by carriers. They can seriously add to the total cost of a freight shipment.
For example, check your invoices that your carriers are not charging you (if this is not necessary) for additional costs related to …
- A “remote” area
- “Non-standard” packages
- “Non-mechanized” packages
- Customs supplements
- Late payment compensation …
You would be surprised to find out how many senders are overcharged because of pricing anomalies!
If you ship your packages every day: Launch a call for tenders
If you send packages or pallets every day, your transport volumes are large enough to issue a transport tender . This gives yourself every chance that carriers will offer you competitive transport rates regardless of the type of shipment you make.