In 2018, U.S. businesses spent an astonishing $1.64 trillion on freight shipping and logistics. The costs of fuel, stowage space, vehicle maintenance and the many other expenses that come with shipping goods add up quickly. If you’re just entering the world of freight shipping, you might be wondering: When it comes to the bottom line, how much does freight shipping cost?
It can be intimidating to sort out the many factors that affect shipping rates. And for many businesses, the rates that cargo carriers charge for their services are a tough obstacle to overcome on the path to becoming profitable. However, armed with the right knowledge, you can both accurately evaluate the resources required to ship your goods and find ways to trim your shipping costs and protect your bottom line.
Air Sea Containers is here to help. In this guide, we’ll look at the key factors that affect the cost of freight shipping and how to calculate them. We’ll also examine some techniques that businesses can use to reduce the cost they pay for freight shipping. First, let’s look at the various freight shipping methods available to shippers today.
Transportation Mode
The first big decision that will determine the cost of your freight shipping is which transportation mode you choose to use. The logistics industry uses several different modes of transportation, each with its own pros, cons and associated costs:
- Ocean Freight: The slowest but most cost-effective type of freight. Ocean freight is many businesses’ preferred choice for international shipment of bulk goods.
- Truck Freight: The standard choice for most freight shipping in North America, with a good balance of cost, capacity and speed.
- Intermodal Rail Freight: A relatively inexpensive type of bulk freight that uses railroad cars. Often used for moving raw materials between ports and logistics centers.
- Air Freight: The most expensive type of freight but also the fastest in most cases.
Within each category are multiple types of carrier services:
- Trucking is typically divided into FTL (full truckload) and LTL (less than truckload); the latter option consolidates freight from multiple shippers into a single truckload.
- Ocean freight has FCL (full container load) and LCL (less than container load), similar to FTL and LTL. For more information on how much a container can hold, see How Big is a Shipping Container?
- Air freight offers multiple categories and levels of speed, including standard air freight, express air freight and deferred air freight.
Each transportation method is appropriate for different types of cargo. Some hazardous materials can only be shipped via certain methods, and many can’t be transported via air at all. Smaller items or low quantities may need to be shipped via LTL shipping, while large items may require FTL. The key is to decide first which type of shipping is most appropriate for your cargo and then begin calculating the cost.
Order a Corrugated Hazmat Box Today!
NMFC Freight Classification
If you’re using LTL shipping, freight classification will be the major determining factor in what you pay to ship your cargo. All LTL freight shipped in the U.S. is classified into one of eighteen standard freight categories in an industry standard called the National Motor Freight Classification. Professionals at all levels of the LTL logistics industry use these categories, so it’s important to know which your goods fall into.
The NMFC classification system uses four attributes to classify freight:
- Stowability: It’s less cost-effective to ship cargo that’s excessively long or tall, features odd protrusions or is impossible to stack.
- Handling: Cargo that is challenging to handle and/or requires specific handling procedures, such as hazardous materials, will be more expensive to ship.
- Liability: Carriers take on more liability when shipping high-value goods, hazardous materials, perishable goods and certain other kinds of cargo.
The lowest freight class, Class 50, consists of so-called “clean freight,” extremely durable materials with a density of over 50 pounds per cubic-foot that can easily be loaded on a standard pallet. The highest, Class 500, is reserved for items, such as gold dust, that have an extremely low density and/or high value.
Get Custom Made Boxes to Fit Your Exact NeedNMFC classes are complex and have many sub-categories. Most manufacturers document the NMFC classification of their products, so the easiest and most accurate way to find your cargo’s classification is to contact its manufacturer. If you need to calculate the classification of goods that don’t currently have an NMFC rating, contact your carrier’s customer service department to get help classifying your cargo.
Hazardous Materials
If you’re shipping hazardous materials, you’ll also need to consider the U.N. hazmat class of your cargo. Since hazardous materials require special care to handle and have a much higher associated liability, they’re almost always more expensive to ship.
The first step is to research the U.N. hazmat class of any type of freight you’re shipping. Next, you’ll need to find a carrier that ships that type of hazmat freight, and you’ll almost always need to complete an application with the carrier before getting a quote for hazmat shipping. Since handling procedures for hazardous materials vary widely, prices will also vary according to what you’re shipping.
If your hazmat goods fall under the categories of an ORM-D consumer commodity or limited quantity exception, your carrier probably doesn’t subject them to the same rules as larger quantities of hazmat. Nonetheless, double-check before you get your quote to ensure your cargo falls within these definitions.
Chargeable Weight
The chargeable weight, also called the billable weight, is one of the most important numbers for calculating the cost of shipping your goods. Chargeable weight can be one of two figures: your cargo’s actual weight or its dimensional weight. Shipping for most goods will be charged by the cargo’s actual weight, but for large items that don’t weigh a lot, the chargeable weight may be the dimensional weight.
Finding the actual weight is as easy as it sounds. Simply put your fully packaged and palletized goods on a reliable industrial scale and weigh them. Round decimals up to the nearest whole pound value. This is the actual weight of your cargo.
Dimensional weight is a little more complex but is still perfectly possible to calculate yourself.
- Measure the length, height and width in inches of your palletized goods.
- Multiply the dimensions together to find the volume in cubic-inches.
- Divide the volume by the divisor number provided by the carrier. Some carriers use different divisor numbers for different levels of service, such as daily rates vs. retail rates.
- The resulting number is your dimensional weight.
Once you’ve determined both the actual weight and dimensional weight of your goods, compare the two numbers. The higher number is your chargeable weight.
Liability
Another factor that affects shipping cost is the liability associated with shipping your cargo. When a freight carrier ships goods, they assume a limited liability for the cargo. Should it be damaged or destroyed in transit, the shipper can file a claim with the carrier. Carrier liability does not typically cover cargo destroyed by so-called “acts of God,” such as natural disasters, or cargo that was already damaged when the carrier picked it up, which is why it’s important to document your cargo condition at touchpoints throughout the supply chain.
Carrier liability is usually capped at approximately 25 dollars per pound or 100,000 dollars for brand new goods, and it provides the replacement value of the goods rather than their retail value. A carrier assumes greater potential liability when they ship goods that are highly valuable, hazardous or otherwise costly if mishandled. Thus, any of these types of goods will typically raise the cost of shipping.
If you’re shipping highly valuable cargo, the carrier’s maximum liability may not cover the full value of your cargo. In such cases, you may want to purchase freight insurance. Not only does freight insurance cover your cargo’s full value, but it covers many “act of God” events, so you can be sure your cargo is covered no matter what the circumstances.
Value-Added Services
Certain types of goods may require additional value-added services. Some goods require specialized facilities and handling techniques to avoid spoilage or breakage. In other cases, businesses use supply chain strategies that delegate certain tasks to their logistics partners farther down the supply chain:
- Warehousing: Many businesses now outsource their warehousing operations to third-party logistics companies. This practice can reduce the costs and work hours required to maintain your own warehouse, as well as provide access to the latest warehouse technologies that may not be feasible for a smaller business to invest in.
- Last Mile Delivery: A semi-truck or cargo ship can’t deliver goods to the end user, so many businesses require a last mile delivery service as part of their freight package. Last mile delivery is typically accomplished via passenger vans and has become significantly more important as increasing numbers of eCommerce businesses sell goods directly to the consumer.
- Temperature Controlled Shipping/Storage: Many goods, particularly food, beverages and pharmaceuticals, must be kept below a certain temperature to remain safe for use. Temperature controlled shipping and storage, also called cold chain logistics, provides refrigerated environments to keep goods cool and safe.
- Packaging and Kitting: For some businesses, it’s more economical to outsource their packaging to a third party. Businesses that sell a lot of items in kits or bundles may also need kitting services to assemble and package these goods from warehouse stock.
- Blast Freezing: This is a relatively new technique that’s used to preserve fresh foods, such as seafood, for transport. By pushing large amounts of extremely cold air into a chamber at high speed, sensitive foods can be quickly frozen in a way that preserves their taste and texture.
- Returns Management: Retail businesses often need to provide a smooth and easy way for end users to return products. Many 3PLs now offer return management services that streamline and quicken the return process, making it easier for consumers to receive refunds and retailers to return items to stock.
If your goods require any of these value added services, make sure to ask potential logistics partners about whether they provide them and inquire about pricing. Costs vary widely from one carrier to another, so don’t be afraid to shop around for quotes.
Tips for Saving Money on Shipping
Maybe you’ve worked out the cost of shipping your goods, and it’s higher than you expected or hoped. Don’t despair; many businesses, especially smaller and newer businesses, find it challenging to control their shipping costs. These tips can help you reduce the cost of freight shipping:
- If your cargo requires temperature-controlled shipping, consider using temperature-controlled packaging instead. Often, it’s possible to ship goods that are mildly or moderately temperature-sensitive using temperature-controlled packaging rather than expensive reefer trucks or storage. Air Sea Containers offers temperature-controlled packaging options that are safer and less expensive to ship than dry ice.
- Reduce the amount of packaging used to ship your goods whenever possible. Extra packaging wastes space and weight, leading to higher shipping costs. Air Sea Containers offers options, such as custom cardboard boxes, that can help you right-size your packaging and reduce its shipping weight while keeping your goods protected.
- Consider whether it’s possible to ship some of your goods disassembled. This is known as “the IKEA trick,” as the Swedish furniture giant is able to keep consumer prices low by shipping all of their furniture disassembled in flat boxes.
For over 20 years, Air Sea Containers has been helping businesses find effective and economical packaging solutions for their cargo. Whether you need a whole shipping container, shipping boxes for sale or just a simple roll of shipping tape, our selection of packaging solutions is designed to make shipping easier, more cost-effective and safer.
For more information on our packaging materials, call us toll-free at (866) 596-9448 or contact us online. Our packaging professionals will be glad to help you find the ideal packaging solution that will keep your goods protected and reduce shipping costs.
