How Do Shipping Prices Work in the Trucking Industry?
Almost every day, we count on shippers to get us the products we need.
Whether the goods are delivered to a store you visit or right to your front door, shipping is an industry that impacts every other industry and impacts people from all walks of life.
Truck drivers and trucking companies are integral parts of the shipping process, representing America’s preferred freight modality, accounting for about two-thirds of shipments.
In trucking, there are two M’s that matter most – and not the M&Ms candy, either. Miles and money are the metrics truckers and their clients are always counting. It’s the only way to come out ahead, whether you’re ordering a product, shipping it, or transporting it.
Here we’ll examine how shipping prices work. We’ll cover how they’re typically calculated, as well as the factors both in and out of your control that can impact rates.
What Factors Are Used to Calculate Trucking Rates
When goods are packed up to ship, there are several factors that determine what the end price tag will be. The first and most obvious one is weight.
While it would seem logical that the more a shipment weighs the more it will cost, in reality the more it weighs the less it will cost per 100 pounds. It’s one reason why many shippers choose to operate in bulk. For LTL shipments, a tier system is typically used with six classes, the first being less than 500 pounds and the highest being 10,000-20,000 pounds.
Weight compared to dimensions is also a factor – or in other words, denser shipments can be cheaper even though they may be heavier. Dividing total weight by total cubic feet can help you determine shipment density.
It may be slightly odd to think a truck full of foam pool toys could be more expensive to ship than a truck full of concrete blocks, but denser shipments eliminate empty miles, which is the equivalent of eliminating waste in shipping.
Special Requests and Special Conditions Drive Up Freight Rates
Beyond just being classified by weight and density, freight can also fall into different categories based on handling requirements or special requests.
For example, some freight may contain flammable materials, harsh chemicals, or other items that require special conditions ranging from protective casing to specific temperatures. The more special requirements, the more fees. Even items like antiques or other valuables can command a higher price to account for the liability they bring.
Since most truckers only pick up and drop off goods, other tasks in their shipping route can also lead to higher shipping costs. Everything from pickup/drop off of refillable containers to gate fees to weekend delivery can cause prices to rise.
Why Smart Planning Helps Companies Save
While shipping rates represent an inescapable cost of doing business, they represent a controllable cost.
When you understand how shipping prices work, you can find ways to structure shipments so you cut costs in the long-run. For companies that get thousands of products shipped per period, even a minor adjustment can lead to big savings.
Whether it’s in-house or outsourced, the logistics department of most companies is dedicated in part to calculating routes, shipment structures, and other factors for maximum value.
Why Do Trucking Rates Change?
Even using factors like weight, density, and handling, shippers won’t always be able to enjoy the exact same rates.
Like anything that costs money, the price can change based on simple supply and demand, meaning you may need to adjust your budget and forecast accordingly. Here are some of the factors that impact shipping rates but are (usually) beyond a shipper’s control.
Freight Demand Can Fluctuate by Sector, Season
Changes in the performance of a certain sector can impact its shipping rates. Whether it’s a new hot product or a type of raw material that’s in high demand, the higher the demand the higher the cost, including for shipping.
Shorter supply of available trucks and truckers can also drive up costs. This means when we’re preparing for summer and the end-of-year shopping season, expect to see shipping prices creeping up. It’s why many people order ahead of time or try to order during low-activity periods.
Regulatory Changes and Economic Factors
We know it’s not just busy shopping seasons that leave the trucking industry short on drivers. Due to the previous generation retiring and struggles filling their spots, trucking is facing an ongoing driver shortage. As this worsens, it can raise shipping rates.
A lack of truckers on the road can also lead to fuel shortages – and any increased cost in trucking be it on fuel or hiring, will almost always be reflected to some degree in shipping prices.
Any new regulations on trucking, be it for speed limits, emissions, and even rest periods could also impact shipping rates for certain companies.
Continued Impacts from COVID-19
Even though vaccines are helping the world recover from the COVID crisis, the effect on the trucking industry still remains to some degree. If anything, it’s got more trucking companies and shippers thinking ahead.
Shutting down the supply chain, or even parts of it, means disruptions that drive up costs by driving up demand artificially. In other words, once restrictions are lifted and “normal” conditions return, the backed-up log of clients means pricing may be higher than normal.
This is also a time when shippers may try out new pricing structures and plans to potentially lessen the impact of future events of this magnitude. Though this could mean higher costs in some ways, it could mean more affordability in the form of fewer long-term disruptions.
Hermes Brings Truckers and Shippers Together
At Hermes, we know the best way to keep clients happy is to provide the shipping services that work with their business structure.
Whether you need traditional trucks, flatbeds, or even refrigerated space, we’ve got the equipment to accommodate your needs. With 24-hour dispatch access, we help provide clients with reliable timeframes and minimal downtime, all to deliver the best in shipping value.
While shipping rates may be a cost that will always be present in the trucking industry, working with the right carrier under the right conditions can help you minimize your costs whether you need to ship a few blocks away or a few hundred miles away.
With coast-to-coast routes covering 48 states, we’re the shipper clients count on when it’s tough to get the job done. We work hard and leverage a team of talented trucking industry experts and passionate, highly skilled drivers to get you your shipment on time. Whether you want to drive for us or ship with us, we’d like to hear from you today.
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Join a team that is part of something bigger than ourselves. Together, we’re not just shipping freight, we’re moving the economy forward