What factors do you need to consider to better control your freight costs? Are there hidden charges you should be aware of? Is the domestic freight market predictable enough to make qualified decisions? Let’s see if there’s a practical road to understanding trucking rates.

If your products are shipped by truck, you’re paying for it. Whether you have your own fleet or have to rely on a third party, having a reasonable knowledge of the factors influencing your trucking costs just makes sense.

As we uncover the information you need, it’s important to realize there are two distinct facets in discussion: trucking rates and truck freight rates. Trucking rates apply to you directly (your costs as a business owner), whereas truck freight rates are the costs incurred by carriers – owner operators and trucking companies.

How to Calculate Trucking Rates

For most physical business, freight and trucking costs are a significant and often revolving part of your operating overhead. Therefore it makes sense to understand the basics so you can break down these costs into smaller increments that help you determine the best trucking rate per mile.

Trucking freight rates are calculated using a per-mile (or kilometre) basis. Therefore, the most important metric when calculating truck rates is the number of miles between your point of pickup and final destination.

Having an average rate per mile for trucking and reasonably accurate information of current freight rates is essential for predicting your shipping costs, providing quotes and negotiating shipping rates with your customers.

What is a Truck Freight Rate?

A truck freight rate is the price a specific broker or shipper will pay a carrier to haul a load. Because the average trucking company only only one to two trucks, the aggregated number of small businesses becomes staggering. This also means there can be a huge variation in pricing from company to company.

Is this a problem or an advantage? When you realize just how competitive the domestic freight market is, you certainly have an opportunity for a win. The trick is in being informed and doing your homework through due diligence.

Factors That Determine Truck Freight Rates

There are number of standardized factors used to calculate truck freight rates. Some of them are predictable or fixed, others are variable. As a group, they’re all taken into consideration when determining truck freight rates.

1. Distance

Whether local or long haul, the distance between start and finish points is an important part of determining trucking rates per mile.

2. Weight

The next most significant factor is the weight of the shipment. For instance, moving crates full of dumbbells is going to cost more than boxes full of ping pong balls.

3. Density

Shipment density is another factor that determines the volume of space a shipment will take up in the truck. This in turn impacts your trucking per mile rates. For all intents and purposes, calculating the shipment density is fairly straight forward: divide the shipment weight by its cubic feet. In other words, shipment weight divided by cubic feet = shipment density.

4. Base Rate

All trucking carriers have established base rates for shipments. Although most rates are usually cited per $100 dollars, they will vary based on the carrier and transporting lane. Your base rate also includes both fixed and variable costs and variable costs. Fixed costs are items such as insurance and equipment leases. Variable costs are those that fluctuate such as fuels expenses and driver pay.

5. Classification

Freight classification plays a significant role in freight rates. For instance, hauling hazardous materials is far different and requires extra precautions compared to shipping stuffed animals.

The National Motor Freight Traffic Association (NMFTA) has defined 18 classes of shipments that affect freight rates per mile. Freight classification is determined by factors such as:

• Product density
• Value of goods
• Handling needs
• Stow-ability
• Liability

Types of Trucking and Haul Rates

The type of truck used for transport will affect the overall cost of trucking. For instance, you’ll need a far more powerful vehicle to haul an oversize bulldozer compared to a vintage automobile. In a similar fashion, you’d want to ship frozen foods in a reefer rather than a flatbed.

Heavy Haul Trucks

Heavy haul trucking companies will use common per mile cost factors such as:

• Fuel expenses
• Repair and maintenance expenses
• insurance for trucks
• Highway tolls and fares

If you’re moving heavy products, a good rule of thumb is to keep an eye on both local and national trucking rates.

Flatbed Trucks

As for flatbed truck rates per mile, the national rates average $3.14 (USD) per mile. However, depending on your location a shipping points, specific areas may have higher or lower rates.

Fair prices for flatbed truck services consider things like:

• Trailer type
• Load-to-truck ratio: the number of loads vs your available trucks
• Cargo weight
• Destination
• Other services such as oversize loads, warehousing, loading and unloading

Refrigerated Trucks

Refrigerated trucks or reefers are equipped with a refrigeration unit for goods that need low temperature control. Since they consume more fuel, reefer freight rates are higher than that of other trucks of the same relative sizes. This difference ultimately factors into your freight prices per mile.

Dry Vans

Perhaps the most common type of truck you’ll see on the highways, dry vans have a non-temperature-controlled sealed trailer and represent a fair benchmark for determining the average cost per mile of truckload freight.

What’s the Going Rate for Trucking Per Mile?

In order to understand the scope of the trucking industry and determine a competitive rate per mile, you need to know how much trucking companies actually charge per mile. Their cost per mile is influenced by such factors as:

• Fuel
• Repairs and maintenance
• Insurance
• Roadway Tolls

For many operations, financing is also rolled into the cost per mile. Typical financing charges for trucks and trailers can range from 0%-30% of revenue.

As of July 2021, trucking rates per mile remain steady. Here are the current rates for the most popular freight truck types:

Trucking rates (in USD) for the most popular freight truck types within the last few years have hovered around:

• $2.30 to 2.86 per mile for dry vans
• $3.19 per mile for reefers, with lower rates of $2.47 found in the Northeast
• $3.14 per mile for the average flatbed
• $2.95 to $3.76 per mile for heavy haul according to heavyhaulandoversized.com

As we’ve experienced recently, inflation and interest rates have been impacting the economy. Resulting in rising fuel prices over the past year thus creating a huge variable when calculating transportation rates.

Company vs Owner-Operator Trucking Rates

In contrast to company drivers working exclusively for a trucking firm, owner-operators own or lease their own trucks. As a form of networking, owner-operators usually work together with a trucking company in order to find trucking jobs and leverage back-office support.

This autonomy comes at a cost though, as owner-operators have to deal with additional stress and the burdens of financing, maintenance, health insurance and related operational expenses largely on their own.

In terms of trucking rates, owner-operators generally earn an average of 75% percent of the loads they take. The balance of the percentage goes to the trucking company.

For a deep dive into the intricacies associated with the operational costs of trucking, please refer to this comprehensive industry pdf: https://truckingresearch.org/wp-content/uploads/2022/08/ATRI-Operational-Cost-of-Trucking-2022.pdf

Trucking Rate Terminology You Need to Know

Building a knowledge base on trucking rates also means understanding the terminology. Other than  pricing, there are a few trucking industry terms you should be familiar with:

Consignor: The entity that sends the freight to its counterpart the consignee.

Consignee: The entity that receives the freight from the consignor.

Carrier: A business that offers shipping services.

Bill of Lading (BOL): Also called a freight bill, the bill-of-lading is a record of all details of the shipment and the agreement between a carrier and the shipper.

Loss and Damage: Loss and damage rates only cover shipments in transit or in storage facility operated by the carrier.

Full Truckload (FTL): Also termed TL, an LTL shipment requires the use of a whole truck.

Less Than Truckload (LTL): Shipments that don’t utilize the full capacity of a truck.

Drayage: Drayage is a form of short-haul trucking that connects the different modes of shipping such as ocean freight or air freight.

Pallets (or Skids): Plastic or wooden stacking platforms that usually measure around 40″ by 48″.

SKU: A Stock Keeping Unit, a method of recording individual items of a different kind, size, or freight.

CWT: A standard shipping weight unit equivalent to 100 pounds.

Finding the Best Trucking Rates is Not as Hard as You Might Think

From trucker shortages, supply chain issues to the prospect of extra charges, the trucking landscape is full of – at times unpredictable pitfalls. But with a solid understanding of the trucking field and its players, you increase your ability to react with agility.

Contact Brimich and Packaging today and talk to an experienced professional who can quote trucking rates tailored to meet your company’s specific needs.

FAK (Freight All Kinds)

Freight All Kinds, or FAK, is a logistics industry term used to assign a single tariff classification by an LTL carrier for freight that would usually ship under several NMFC codes.

These NMFC codes are the result of how commodities are assigned a classification by the National Motor Freight Traffic Association (NMFTA).

NMFTA created the National Motor Freight Classification (NMFC) tariff to help classify all commodities into 18 different freight classes.

The assigned values range from 50-500, and take into account the difficulty involved in moving the goods.

In short, the higher the classification, the higher the cost per hundred-weight due to the increased difficulty in shipping the product.

Because it’s often difficult to manage multiple classifications for shippers, utilizing FAK a great opportunity for both the shipper and the LTL provider to move the freight more efficiently.

The FAK Averaging Solution

Let’s say you’re a shipper trying to ship different classed commodities on the same skid.

The FAK shipping solution groups multiple classes of freight into a single class. This streamlines the shipping process by reducing the need for re-classifying items. By averaging the specifics of a number of commodities, a more fair shipping rate is achieved for both the shipper and carrier.

Why a Shipper Should Negotiate a FAK Tariff

• FAK simplifies the shipping and invoicing process
• FAK can reduce tariff freight rates being paid.

How to Validate FAK Options

Depending on what you’re shipping, FAK’s are a great means of reducing LTL rates and simplifying the entire LTL process from start to finish.

To assign a FAK class, some freight characteristics need to be in alignment:

• Freight weight and density must be similar across the commodities shipped.
• Shipping of multiple NMFC freight commodities.
• Product stow-ability is similar.
• Cargo liability coverage is appropriate for the freight in total under the FAK.
• LTL minimum freight charges are appropriate for all commodities in the classification.

With these points in mind, the LTL carrier will determine which of the 18 FAK commodity codes make the most sense for the shipper’s freight.

How Can an FAK Help Your Rates?

There are definite benefits for shippers when you negotiate a FAK with your carrier.

Moving certain types of freight can be more beneficial when a FAK pricing strategy is involved. Here are some examples of situations where shippers can use a FAK pricing strategy and determine shipping costs.

• When shipping freight in a low freight class – Carriers can negotiate on low freight class shipments since their operations ratios are better for lower classed freight.
• Shipping density-based commodities – Density-based shippers such as industrial distributors can often achieve better shipping rates through negotiation.
• Shipping mixed freight pallets – When shipping with different classifications, the item with the highest classification is used to determine the class of the entire pallet. Negotiating a FAK in this situation can lead to considerable savings.

When Not to Consider Using FAK

On the other hand, there are shipping scenarios that do not lend themselves to utilizing FAK based pricing strategies. A few of them are:

• If  the majority of your shipment are lower classed freight – a FAK doesn’t make much sense from the carrier’s or the shipper’s point of view.
• Shipping items of high-value – when attempting to file claims for damaged goods, carriers will often only be responsible for the freight class being paid. This means your high priced items will only achieve the protection of the averaged FAK classification.
• If you use a TSM system – A Transportation Management System essentially eliminates the need for FAKs because dynamically rating shipments of multiple classes can be done easily.

Other Areas Where FAK’s are Used

While most of our discussion has been around a shipper’s freight FAK assignment, FAX is also used in the process of freight consolidation.

Multiple entities such as freight forwarders, consolidators, Container Freight Stations (CFS’s), 3PL logistics service providers, and larger shippers can create their own consolidated loads to operate under FAK tariffs.

In these situations, the use of a TMS (transportation management system) can quickly and easily build out the consolidations.

Final Thoughts on FAK and What It Means

FAKs can certainly provide substantial benefits to both shippers and carriers. But you should take care to ensure your particular type of shipments can take advantage of what a FAK has to offer.

If you need further clarification on how to negotiate an equitable FAK for shipping, or are looking for further assistance in gaining the best possible rates for all of your shipments needs, contact Brimich today!