How To Calculate The Real Cost of Freight

Although understanding the logistics of supply chain management can be tricky, it’s entirely necessary for businesses that want to thrive in competitive industries.

A variety of industries in the United States rely on efficient freight transport to deliver products. Calculating the cost of freight is a key part of ensuring financial success, but businesses often suffer from overcharges and unexpected expenses from miscalculations.

This article will shed light on factors that affect how much money it costs to ship cargo, providing insight into how prices are determined and offering guidance on managing these costs more effectively.

What influences the cost of freight?

Many factors influence freight costs, each contributing to the final price businesses and customers pay to ship their goods across states, countries, and towns.

For more information, check out this article on what you need to know about freight rates in North America.

External influences 

The economy and market conditions have an overarching influence on freight costs. Existing supply and demand cycles determine slow and peak seasons, directly affecting delivery rates. 

The price of diesel is another external factor that influences operating costs for carriers. When there are fluctuations in fuel prices, freight rates must adapt to cover these changing expenses. Fuel consumption can vary based on traffic, delays, or poor weather conditions. 

Internal influences 

Freight rates and the best way to ship efficiently are largely determined by the types of products being transported. Depending on the nature of the goods, freight operators may need to use specialized equipment to move the items. 

For example, perishable food items like meat and seafood require specialized handling and refrigeration. Heavy products also need machinery to lift them to their final destination. 

Variables to use to calculate freight cost

Freight cost calculations require accuracy and precision, with several variables coming into play.

Dimension and weight

The dimension or measurement of the cargo by height, width, and length can affect total cost. Larger and heavier products sometimes require larger trucks and result in greater fuel consumption. 

If the products are considered delicate or high-risk, some freight operators might also need technical training to handle them.

It’s important to keep in mind that there are also legal requirements that businesses must adhere to. Different state laws specify the maximum weight of cargo allowed for safe transportation.

Additional fees

Insurance and other potential charges for handling fragile items can add to the final bill. Documentation is crucial in this regard—a comprehensive contract with the freight carrier should be outlined detailing all expenses to avoid costly surprises.

Distance, location, and timing

Longer distances result in a higher bill due to the increased cost of diesel, operations, and labor.

Exact distance costs can vary depending on exact addresses. For example, it can cost more money to transport within a large city than between smaller towns. In addition to the actual distance and time, ease of access can increase prices. For operators that work in cities, prices are often much more expensive. 

Consider these additional factors when calculating the cost of freight:

• If the delivery location is residentially or commercially zoned
• If the driver must bring the shipment inside of a building or just drop it off
• If there’s a loading dock present
• If the receiver must sign for the delivery
• Appointment times

Custom clearance 

Depending on the destination country and freight, you may need to pay taxes and duties on the shipment. These fees must be paid during both the exportation and importation process. 

Because the cost of customs varies depending on many factors, it’s important to seek clarity ahead of time so you’re not surprised by the final bill. 

Delays and damage

Delays and damage increase fuel and labor costs. Planning for contingency expenses and building them into estimated freight costs will help soften any financial blows.

Need to improve how you book and track freight? Choose Silo

Manual calculations can be labor-intensive and lead to inaccuracy. And while an online calculator tool or service can give you a ballpark figure, they lack the expertise to determine accurate pricing. 

Avoid mistakes by partnering with Silo. Our products are designed for small and medium-sized businesses to streamline the process of booking and tracking freight. Silo prioritizes precision, efficiency, and convenience, helping your business get a tailored quote within just a few clicks. 

Silo also provides freight financing to help you better deliver product, pay drivers, and cover high fuel costs—all without having to wait for customers. 

“I'm confident I can pick up the phone and get good advice and support through Silo. For example, I know I could call up one of my contacts on the Silo team and ask their help finding an alternate supplier or a freight provider in a pinch.” Ganfer Fresh

Companies like El Campo Imports have used Silo’s financing products to their advantage.

Learn more about how Silo can transform your freight management experience by visiting our website and book a demo today!