Definition
Freight costs, also known as shipping expenses or transportation fees, refer to the total charges incurred when moving goods from one location to another. These expenses encompass various modes of transport, including air, sea, rail, and road. Freight costs are influenced by multiple factors such as the shipment's weight, volume, distance traveled, chosen transportation method, and additional services like customs clearance, insurance, and specialized handling requirements.
FAQ
Example or usage in road freight logistics
A manufacturing company needs to transport 10 pallets of electronic components from its warehouse in Chicago, Illinois to a distribution center in Dallas, Texas. Here's how the freight costs would be calculated:
Shipment details:
Total weight: 12,000 lbs (1,200 lbs per pallet)
Dimensions per pallet: 48" x 40" x 60" (L x W x H)
Distance: Approximately 967 miles
Transportation mode: Less-than-truckload (LTL) shipping
Base rate calculation:
LTL carrier quotes $1,800 based on weight and distance
Additional factors:
Fuel surcharge: 22% of base rate ($396)
Liftgate service at delivery: $75
Limited access delivery fee: $100
Insurance (0.5% of declared value): $150
Potential discounts:
Volume discount for regular customer: 10% off base rate (-$180)
Total freight cost calculation:
Base rate: $1,800
Fuel surcharge: $396
Additional services: $325
Subtotal: $2,521
Discount: -$180
Final total: $2,341
