How to Calculate Freight Delivery Costs – A Guide for Logistics Providers

Whether it’s road freight, rail freight, or sea and air freight, when logistics service providers calculate and set freight delivery costs for their customers, more factors come into play than just the distance or the weight and size of the cargo. Each individual shipment can vary in terms of labor, costs for intermediate storage, or securing the load. So, while there’s no single formula to estimate freight costs, there are key aspects you should be aware of. Let’s break them down.

Cargo Type and Quantity: The First Freight Costs Estimation Factor

Before considering the shipping route, the first question is: What type of cargo are we dealing with? Is it general cargo, bulky goods, bulk goods, or hazardous materials? Bulky goods, for instance, require more effort and thus result in higher freight delivery costs, which is even more true for hazardous materials. Additionally, certain goods can only be transported by specialized trucks: for example, a tipper for bulk goods or a temperature-controlled vehicle for pharmaceutical transport.

The size and weight of the shipment, or the number of individual items, are other key factors in the calculation. The larger, heavier, or more numerous the shipment, the higher the cost – that’s obvious. However, with large shipments, the cost per unit or item may decrease.

For bulk goods like grain or gravel, the loading process is relatively quick, and the cargo allows for optimal utilization of capacity, which helps keep freight costs low. However, bulk goods are unsuitable for partial loads, leading directly to the next cost factor – the shipping method.

Shipping Method: The Second Freight Cost Calculation Factor

Bulk goods can only be booked as a Full-Truck-Load (FTL) and not as a Less-Than-Truck-Load (LTL). FTL means that a truck is dedicated to a single customer’s freight, so that customer covers the full cost of the truck. Freight delivery costs are calculated per truck in this case. General cargo, on the other hand, can be consolidated with other shipments, allowing for partial loads.

Partial Loads Require Sophisticated Route Planning

For an LTL shipment, individual goods are collected from different shippers and combined into one consolidated transport. This requires meticulous route planning and load configuration from the logistics provider to match the destinations of the individual shipments. While LTL requires more planning than FTL, it’s cheaper for shippers because the freight delivery costs are shared among multiple customers. In many cases, LTL costs are calculated per pallet, making it easier to estimate freight costs for individual shipments.

In partial load transport, there’s also the concept of Partial Truckload (PTL), where different types of goods are transported together from the start to the final destination. For example, a large, bulky item like a machine might leave extra space in the truck’s cargo area, which can be used for smaller, non-palletized items.

When Partial Loads Aren’t Feasible

There are cases where partial loads aren't possible due to technical or safety reasons, or when the destinations are too far apart to make partial loading economically viable. If time is critical, FTL is the only option, even if the truck isn’t fully loaded. Express delivery services will further increase the cost.

If time is critical, FTL is the only viable option, even if the shipment doesn’t fully occupy the truck’s cargo space. The costs increase further when express delivery services are required.

Partial Loads Beyond Road Freight

On long-haul routes, particularly for rail and sea freight, containers are the standard shipping units. Much like trucks, you can book a Full-Container-Load (FCL) or a Less-Than-Container-Load (LCL), offering corresponding cost savings for partial container loads.

Distance: The Third Freight Delivery Costs Factor

Once the type of cargo and shipping method are factored in, the length of the transport route becomes another key cost driver. Naturally, a trip from Essen to Gelsenkirchen is less expensive than one from Copenhagen to Lisbon. However, calculating freight delivery costs purely by distance isn’t straightforward.

Minimum Effort for Short Distances

There are minimum costs involved in every delivery, regardless of the distance traveled. These include tasks such as:

• Reaching the loading point

• Loading the vehicle
• Unloading the vehicle
• Returning to the logistics provider’s location

Even for short distances, these activities still apply, and sometimes, the short usage of a vehicle means it’s unavailable for longer hauls, which can also affect the pricing.

That’s why, for road transport (and other freight types), there is often a base rate that has a greater impact on short distances compared to longer ones. Similar to taking a taxi: the base fare is always charged, even if the trip is only a few kilometers to the local doctor’s office.

It's Not Just About Distance

Although distance is important, other factors also play a role, such as:

• Is the transport national or international?
• Is the route flat or through mountains, like the Alps or Pyrenees, which would consume more time and fuel?
• Are ferry crossings involved, as is currently the case for the direct route between Copenhagen and Lisbon?

Additional Factors That Influence Freight Delivery Costs

Each transport company faces different costs for personnel, process management, or quality control. High-quality delivery services may come with a higher price (though higher rates don’t always guarantee better quality). Additionally, sustainability standards can affect freight costs but may also provide reputational benefits. DHL Green Carrier Certification or GoGreen Plus Service are examples of this in road freight.

The timing of a transport request can also influence pricing, for instance, if public holidays or adverse weather conditions like frost or flooding fall within the transport window. Market-specific factors, such as freight capacity surpluses or shortages, also play a role in determining prices.