Welcome to the first week in our blog series honing in on carrier pain points. This week, we will be exploring freight rates in a variety of forms: how are the rates generated, what are the variables that impact freight and the possible solutions.
How are freight rates generated?
Drivers analyze the cost per mile for a lane and based on their knowledge of the average price in the last thirty days and they come up with a fair rate. Seems simple enough, right? In reality, this is only half of the equation. There are a variety of costs in transportation services that add up to be significant. This makes it difficult to navigate what the averages are and what the higher rates available given the current demand. This puts carriers at a disadvantage when it comes to negotiating power with brokers and shippers.
What variables impact freight rates?
This has a direct impact on freight. With the rise and fall of oil rates, this inevitably keeps the transportation industry on their toes. For example, when fuel prices skyrocket, logistics management are forced to either raise their prices or keep the rates lower and choose to swallow financial losses. In addition, this not only impacts logistics, as this pain-point creates a domino effect amongst the rest of the economy. Higher fuel prices leads to higher rates in transportation, which ultimately alters the rate of the consumer goods being shipped. For this complex topic, we will fully dive into this in next week’s blog (stay tuned).
This is a hidden piece when it comes to freight. As one can imagine, there are different trucks that are necessary for certain intermodals. For example, Northern California holds beautiful winding roads; however, this means a standard 53’ or 48’ trailer will not be sufficient for traveling amongst the oceanside curves. This leads to the carrier using a 27’ or 36’ tractor-trailers. While the equipment is smaller, the price to accommodate this delivery or pickup is higher. In addition, certain destinations may only be a coming from or going to, which results in the rate accommodating that specific destination.
While tolls are not prevalent in all fifty of the states, they still have a significant impact on transportation. Toll rates have significantly increased, which results in (yes, you guessed it) an increased freight rate for these lanes. To put this into perspective, tolls have increased 72.5% in the last ten years, pulling in a 14.7 billion in revenue in 2018.
In addition, Texas A&M Transportation found that these tolls do not necessarily support the transportation industry; in fact, toll rates for carriers can be up to six times more pricey than passenger vehicles.
The good-ole saying time is money applies to logistics as well. A truck needs to generate a certain amount of revenue a day. For example, if a load uses a truck for longer than it normally would take to drive that load, the carrier would need to up the price for that shipment.
And the question we have been waiting for - what is a possible solution for this?
At FreightWeb, we are deeply invested in the first-ever Carrier Hub. We’ve identified the continuous theme of these carrier pain points and have factored all of these variables in our easy-to-use rate tools.
To begin, you will enter your shipping mode (LTL, Full Truck or Partial), type of truck (reefer, dry van etc), origin and destination information. In addition, you will enter more details about the load such as weight, number of pallets, commodity description and any accessorials. Next, your user-friendly input screen will appear (pictured below) to enter this information:
Once you hit calculate, our rating engine will use our custom algorithm behind the scenes to produce a range within which you can bid on the load.
This is just one of the ways we want to provide transparency to carriers and owner-operators who may not understand what the going rate should be for a particular lane or for a particular type of load. We would also welcome feedback from users on how we can make this even more useful to you. Feel free to contact us directly.