Every trucking company will have its own method and system for charging clients. Freight charges can range from simple to complex, with many factors affecting the final price. In the trucking industry, offering just the right rate is essential.
Unfortunately, determining the right rate to charge can be a tricky business. Trucking companies face a lot of uncertainty because of variable costs (VCs). VCs are costs that change and may be difficult to predict. Examples of VCs for trucking companies include overtime employee pay, tires, and gas. Because of these varying expenses, trucking companies need to make extra sure that they are charging their clients properly in order to turn a profit.
If you’re interested in enrolling in a dispatching program, read up on these three facts about freight charges to get a head start.
1. Students in Dispatch Schools Should Know Rates are Determined by FTL or LTL
When it comes to freight, rates are determined using two different methods, full truck load (FTL) or less than truck load (LTL). When a shipper opts for FTL, it’s likely because what they are shipping is big or heavy enough to take up the maximum space or weight requirement of a truck. Shippers may also choose FTL if they have a delicate shipment and want the entire truck for themselves, or if they are running on a tight schedule. In most cases with FTL, freight is charged by weight and distance traveled in kilometres.
In cases where shippers only take up a portion of the truck, LTL rates come into play. LTL rates are generally cheaper than FTL because the cost is split amongst several shippers. However, LTL shipping is less efficient because the truck will be making stops along the way.
2. Students in Dispatch Schools Should Know Size and Weight are Major Factors in Pricing
As graduates of dispatch schools may know, LTL rates are determined in a variety of different ways. One of the main factors in determining freight price is by its size and weight. The more space the shipment is taking up, the more it will cost to move. Weight can also play a role in pricing. If a shipper is moving something that is small but heavy, it will take up a lot of the truck’s weight limit. That’s why the shipper must pay for that added cost. Shipping companies will usually determine this by calculating the shipment’s density.
3. When Determining Freight Charges, Freight Class Can Make a Difference
As graduates of a transportation operations program may know, freight class was designed to provide a standardized way to calculate shipping costs. Freight class accounts for the nature of the product. This consideration is extremely important because no two shipments are the same. For example, shipping a truck full of towels is very different from shipping a truck full of expensive crystal vases.
Classes range from high to low and can be based on the following variables:
- Density, which helps trucking companies determine how much area a shipment will take up and how much it will weigh
- Stowability, which is how neatly the shipment will fit into the truck.
- Value, because an extremely valuable shipment will cost more to ship due to the added risk involved
- Liability, which determines the chance of the freight being damaged or stolen.
All of these factors work together to determine the shipment’s class and final freight charge.
Are you interested in enrolling in a dispatching program in Toronto?
Contact Automotive Training Centres today to learn more!