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Freight transportation – pricing
The price of freight transportation is the fee for the delivery of cargo from one location to another. Although at first glance the pricing seems quite simple, this is actually not the case. Firstly, there are different types of freight transportation: by sea; by land; by air; and by rail. The prices for each of these are calculated differently. This is related to a variety of additional services covered by each type of transportation and cargo. Additional services can include: reloading; customs broker; crane rental; or special requirements of the cargo or its delivery.
The price differences are most often related to whether full or groupage cargo is sent.
In most cases, ‘full cargo’ denotes a container or cargo space that is fully reserved for the goods of a single customer. ‘Groupage cargo’ is cargo space that is shared by the goods of different customers. The costs are divided according to the occupied space. This type of transportation is chosen when the cargo does not take up much space.
Sea freight charges are mainly determined by the carrier’s price rate and port costs incurred for handling, storing, loading and unloading the cargo.
The price of sea freight is determined not only according to the distance to be covered, but also according to various additional costs, which may differ from country to country and from port to port. For example: domestic delivery (delivery of goods to the port warehouse or to the port itself); cargo handling at the port terminal (loading of containers, loading with a crane or a lift truck) or the preparation of documents for shipment (certificates of origin, processing of bills of lading and customs declarations). In addition, such cost items as: separate amounts for security; the fuel consumption ratio linked to fluctuations in fuel prices; surcharges for the handling of dangerous goods; cargo tracking services and other costs should be taken into account. The price offered will often include all the additional costs.
The calculation of road freight transportation prices is simpler as the costs are mainly determined by the size and weight of the cargo. The weight of the cargo determines which type of cargo trailer will be the most suitable for transportation, whether it be a lowered trailer that allows the transportation of forest equipment, or a simple tarpaulin truck. The transportation price also depends on the type of cargo. Certain cargos require special conditions: certain temperatures or safety equipment for example. Finally, the location of the cargo and the place of delivery will be a determining factor in the price calculation. The price of transportation depends not only on the distance travelled, but also on the destination. The more distant the destination from the popular city centres, the higher the transportation price. This is because freight drivers plan their routes so that their cargo space is always filled. Driving with an empty truck incurs additional costs.
Road freight is also commonly divided into full and groupage cargo. Loading metres are used to calculate prices for groupage cargo. One loading metre is equivalent to 1 metre of the entire length of the cargo space. Loading metres are calculated according to the formula [(cargo length x cargo width)/ truck width]. Truck width is 2.40 m in most cases.
Air freight transportation prices mostly depend on the weight and quantity of the cargo. In addition to the weight, cargo volume weight ((length x width x height) / 6000 cm3kg-1) is also measured and the heaviest value (weight or volume weight) is used as the basis for calculating the price. For example, a cargo weighing 250 kg with dimensions 120 cm x 80 cm x 120 cm is sent, and according to the formula: 1,152,000 cm3 divided by 6000 cm3kg-1 results in a volume weight of 192 kg. In this case, the price of the cargo will be calculated according to it’s weight of 250 kg. The relevant weight is multiplied by the carrier rate. The rate changes along with the weight. The higher the weight of the cargo, the lower the transportation price per kg.
In addition, the price often includes: the costs of customs brokers; insurance; fuel consumption ratio (similar to freights transported by sea) and airline terminal fee. The price can be divided into two parts: cargo handling fee at the airport of departure and the destination; security fee; customs duties and taxes. In addition to these costs, storage fees or charges for special cargo inspections may be applied in separate cases.
The type of cargo plays a key role in rail freight transportation pricing policy. Each type of freight is assigned its own tariff code depending on whether it is coal, liquids or timber. Additional charges are incurred by the wagon rent. Wagons can be owned by the railway company or by private companies. Accordingly, each cargo code and wagon type has its own tariff, which differs from country to country. To calculate the final charge, these tariffs (cargo code and wagon type) are multiplied with the planned length of the journey in each country. Of course, the weight of the cargo is also taken into account. The biggest fluctuations in rail transportation prices are related to the availability of wagons. The more in demand wagons are, the higher their price is.
Changes in freight transportation rates
What should you find out before requesting an offer?
If freight transportation is planned, information about the cargo must be prepared in order to find out the price. The more detailed the information is, the more accurate and faster a price offer can be made.
It is important to find out the dimensions and weight of the cargo for any type of cargo transportation. In addition to the loading and unloading address, it should be clarified when the cargo will be ready for transportation. Also, all contact information of the sender and the recipient should be provided for communication.
Managers should also find out the contents of the cargo to state whether the status and value of dangerous goods should be applied, whether insurance is required and, in certain cases the Incoterms. Likewise this is the most appropriate stage for stating whether there are any special requirements related to the shipment.