07/20/2021 | Press release | Distributed by Public on 07/20/2021 12:43
What factors go into truckload shipping costs?
Controlling transportation costs is an important part of managing a profitable business. And if you rely on truckload shipping to get freight to its destination, you know how often those rates can change. Knowing what goes into full truckload (FTL) prices can help you manage costs more effectively and sets you up for better conversations with your transportation partner.
The factors that impact full truckload rates fall into two broad categories: the market and your specific shipment details. And each category comes with its own mix of variables.
The market's impact on FTL pricing
Supply and demand largely impact truckload rates. But because supply and demand are influenced by multiple complex factors - including consumer spending habits, manufacturing output, GDP growth and seasonal freight trends on the demand side and equipment levels and driver availability on the supply side - the cost to book a shipment can rise and fall just as fast as trailers fill and empty. That's why spot rates can fluctuate daily (and sometimes even hourly). The more demand increases, the higher rates will go. Learn more about the truckload market.
Fuel is another fluctuating factor in truckload pricing. Since fuel prices change based on season, demand and location, carriers typically use a base rate and then apply a fuel surcharge if the base rate doesn't cover the actual cost. Talk with your carrier about when surcharges apply so you know what to expect.
How shipment details affect truckload rates
Because truckload shipments involve exclusive use of a trailer, factors like density and freight class aren't what drive the price. Instead, the origin and destination markets, how far it's going, when you need it picked up and delivered, the specific equipment required, and any special services are the details that matter when getting a quote.
The origin and destination of your shipment matter for two reasons: the total mileage and the lane the freight is traveling in. Total mileage impacts fuel consumption and the amount of time the driver spends on the road. The lane impacts capacity levels. So, while longer distances may cause higher rates to offset the fuel and driver time, it's possible you'll get a better price if your shipment is delivering to a location that needs more equipment. However, this also means rates may increase in areas where it's more difficult to get return freight.
The amount of time between pickup and delivery can influence your quote. If a driver doesn't have enough hours of service to meet a deadline, your shipment may need solutions like team drivers or time-critical service. The amount of lead time you provide can also affect the price - the more time a truckload broker has to shop and negotiate on your behalf, the more likely they'll find capacity to move your freight.
Specialized equipment like refrigerated and flatbed trailers typically cost more than traditional dry vans due to the limited availability and added driver experience required to operate them. And, if it's an oversized load (shipments taller or wider than 8.5 feet), there can be added costs like load permits and fuel for escort vehicles. Be sure to communicate the specific size and handling needs of your freight to ensure the correct equipment is booked and your quote is accurate.
Shipping hazardous freight? Need the item delivered inside a residence? Go beyond your allotted free time during loading or unloading? All of these circumstances will result in assessorial charges on your freight bill. And while these charges tend to be predictable and don't apply to every load, understanding what they are and when they apply can ensure you're prepared for how much you'll pay.
Suggested Read: The Impact of Driver Detention
Discussing truckload shipping costs with your carrier
When it comes to pricing, you have two options: play the market through spot rates or negotiate contract pricing. Both have their advantages (read about spot vs contract rates here to learn more), but if your freight needs are consistent, contract rates can usually offer long-term cost savings. Not only do they help secure capacity and consistent pricing, but they also help you avoid downstream issues like stockouts and loss/damage - problems that may occur if you're always prioritizing the lowest transportation cost. Download our Shipping's Hidden Costs whitepaper for more information.
To start negotiating rates, you'll want to go through an RFP process with the carriers you're considering. This will help you get accurate pricing and ensure you're partnering with a carrier that can fit your current needs and flex with you as your business grows or changes. Once you've onboarded with a transportation provider, you can continue to work with them to find cost saving opportunities and create efficiencies in your supply chain.
Ready to discuss your freight needs?
ArcBest truckload experts are here to help you navigate the market, secure appropriate pricing and make adjustments as your needs change. Learn more about our truckload solution or log in to your arcb.com account to get an instant truckload quote.