Calculate and compare freight costs with modern web applications

by Johannes Wahllich

Transport offers, sometimes also called freight offers, are often not easy for shippers and importers to compare. Calculating freight costs based on the Excel and PDF offers of the forwarding agents is usually difficult and time-consuming. This is due to the way transports are organized and how shippers, freight forwarders, carriers, airlines and other transport companies work together.

Calculate freight costs for parts of a transport

The dispatch of a consignment begins with the pick-up, the so-called pre-carriage (English door port), before it is transported in the main leg (English port port) over longer distances by air or sea freight. The transport ends with delivery to the recipient. The distance from the airport or seaport to the recipient is called the port door. When buying or selling the goods, the recipient and the sender determine who pays the freight costs for which part of the transport. This is done using so-called Incoterms (International Commercial Terms). In the area of ​​land transport, there is no such subdivision into subsections. Transports always take place there from loading gate to loading gate. Calculating freight costs is therefore particularly challenging when transporting by plane and ship.

Freight payers specify the transport mode

Freight payers usually decide on the type of transport or the mode of transport. You choose whether the cargo should be loaded by plane or ship. You also decide how the route should be covered from the pickup location to the respective airport or seaport. The collection or delivery by air freight is almost exclusively by truck. In sea freight, in addition to the truck, the train, the inland waterway or combined transport come into question.

Shipping companies or logistics service providers organize the transport

The freight payer or consignor normally instruct a logistics service provider or a forwarding agent to organize the transport. If necessary, they also assume the associated activities such as packaging, document preparation, customs clearance and storage. For forward, main and final, ie the specific transport of the consignment, the freight forwarders use other companies. These are lorry transporters, rail operators or barges. In the main run airlines and shipping companies take over the transport.

Composition of freight costs unclear

The forwarders have a special role to play. They buy freight or various transport services from shipping companies, airlines and carriers and sell them with a corresponding margin to their customers, the freight payer. The whole thing is complicated because the purchasing conditions of the freight forwarders are very different from each other. As a rule, freight forwarders do not simply receive freight costs per kilo or ton, but different cost points are listed up to 50. The best known are certainly bunker adjustment factor (BAF), currency adjustment factor (CAF) in ocean freight or fuel and safety surcharge in air freight. The offer items or cost points then differ depending on the shipping area, carrier and airline. Quotations received by the freight forwarders are thus often difficult for logistics experts to understand.

Calculation basics make it more difficult to calculate and compare freight costs

A simple calculation of freight costs and their comparison is complicated by the fact that the various offer items and surcharges are not valid only according to actual weight. The settlement basis can also be the so-called volume weight, a fictitious weight per cubic meter. The respective higher weight is called then chargeable weight, which is billed. Often, each cost item has a different basis for calculation.

Simplifying examples of weight to volume ratio or chargeable weight:

Land transport: 1 cubic meters = at least 200 kg

Air freight: 1 cubic meter = at least 167 kg

Sea freight General cargo: 1 cubic meter = at least 1 ton

Logistics service providers complicate offers and leave the risk to shippers

The purchase of transports by carriers and airlines is therefore complicated even for freight forwarders. Instead of making it easier and more transparent for their own customers, the shippers, they pass on their purchasing conditions more or less unfiltered. On the offers that they give the freight payers, they also list their own cost points. For the customers, this usually results in very incomprehensible and intransparent offers. It is virtually impossible for them to calculate and compare actual freight costs in order to decide on a correct basis for a logistics partner.

Variable quotation items make it impossible to calculate and compare freight costs

In addition, logistics service providers also include costs such as demurrage and detention in their offers. These are fines that have to be paid if containers are not picked up from the port in time. In the general cargo sector, this means a shortage of storage time. Often there are also diesel floaters, so percentages on the pickup and delivery costs. There are also ongoing items such as customs and taxes. The whole thing is complicated by different currencies and exchange rates.

So it stays that way: companies can rarely calculate and compare freight costs independently and certainly not efficiently from the offers of forwarding agents.

Modern freight forwarders make it better

Some forwarding companies recently try to make their customers more transparent on-line about the cost components of a transport and why they can change on a monthly basis. These are offers from digital forwarding companies or online options from classic forwarding agencies. These digital offerings increase trust, provide traceable offers and make it easy to calculate and compare freight costs.

For senders, however, it should be noted that they should not rely on the calculation of the freight costs of individual shipping companies, but rather always obtain several comparison offers, as prices can fluctuate very strongly.

Calculating and comparing freight costs is still essential for shippers

An elementary understanding of shippers' purchasing conditions is certainly very helpful for shippers to understand offers and make qualified decisions. However, the companies should no longer expect to understand the complicated offers in detail because there are now good alternatives.

With the web application, companies can obtain standardized transport offers from all logistics partners of their choice and compare them. Freight forwarders can still submit their complicated supply structures without this being disadvantageous for shippers. Because these web applications standardize the calculation bases, convert currencies, and automatically calculate and compare all freight costs based on the offers of all logistics service providers. There is no easier or more efficient way to calculate, compare, and obtain a neutral market overview today.

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