The price of transporting goods by truck has decreased dramatically, making it the most affordable option for companies looking to ship large volumes of freight between locations. If you’re thinking about trying out a trucking company like this one, www.steelesgroup.com, it’s important to understand how they figure out their pricing model.
Today’s article discusses how trucking companies calculate their rates and decide what to charge you for their services.
Trucking companies charge by the mile, the weight of the load, or both. There are other complexities involved in trucking freight, but these are the basics of what’s happening when you see that extra charge on your bill.
For example, if you’re shipping 100 pounds of freight that is 150 miles away and it takes 10 hours to get there with a clearance rate of $5/mile, then you’ll be charged 100*10*$5=$1500. You would pay this for one way on a single shipment rather than two ways on two shipments (150 miles) since typically shipments go back and forth between destinations on most routes.
Now let’s say your freight is heavier, and it takes 40 hours to get there because the truck is creeping along at 45 mph. The trucking company will charge you $5/mile again, but now we’re travelling 200 miles instead of 150 miles, so we’re going to pay $2000 for the shipment.
The difference here and why the charge went up is that sometimes these costs can be calculated into a price per pound or per pound per mile depending on whether you use a pallet or not. That means that if you shipped those same items in a container and charged $25/pound to move them, then the extra 10 hours would be calculated as $2500.00 per pound.
The price per mile is then subtracted from the cost of the shipment, which you can calculate by dividing the freight charge by mileage. However, if your company uses a third party to pick up and drop off, then things get even more complicated.
If your company contracts with a third-party company to pick up and drop off, you have to deal with double charges because there can be two charges for picking up and dropping off at each place. Businesses that ship via truck will usually have their person doing this. Still, you also may have a driver delivering freight to another business who picks it up themselves before delivering it somewhere else entirely.
When an individual driver picks up and drops off freight, many companies will calculate the cost of two shipments into one. This means that you’re paying for both the miles travelled and the freight, but it’s necessary to get accurate prices. If you’re not using a third party to handle this process, then you’ll have to calculate both miles and freight separately.
If your company uses a third party to pick up and drop off freight, you’ll need experience in this area to keep track of how much it costs because so much depends on what kind of rates and routes your company uses and how often they change. You can also expect to pay more in fuel costs when you use a third party.
Adjust the Mileage Rate
When trucking companies calculate what you pay per mile, they usually charge by the 85th percentile of the distance your goods travel over your route. This means that if a pallet has travelled 55 miles before it gets picked up, then you’ll only be charged about $1/mile for this shipment. If it’s travelled 125 miles, then you’re paying $2.50/mile for this shipment. Sometimes trucking companies will calculate per mile, but they need to know how long each shipment will take to get there, so they often charge based on the 85th percentile of the length of time instead of per mile.
While the 85th percentiles are based on the distance of the load, they can also be based on weight or other factors to make the calculation easier. For example, if you transport an empty truck and want to calculate what you pay for each shipment, your mileage rate is usually figured out by dividing the price per pound of freight by the weight of an empty truck. If you were transporting a pallet and it weighed 175 pounds, then the cost would be divided by 175 instead of 85.
Suppose the trucking company you hire will charge different rates depending on whether it’s a single shipment or two shipments on a route. In that case, they’ll usually deliver both shipments at once and calculate that into one rather than charging for two separate shipments.