Understanding a freight quote can be a nightmare at the best of times. With all the hidden charges, unclear costs and ambiguous price levels, it’s no wonder most businesses are overcharged for freight. These techniques used by the transport industry make sure clients are kept in the dark. However, being aware of these tactics means that you can make sure that your business isn’t being ripped off on freight. Here is our summary guide to the most misleading freight charges. For more information on how you can alleviate these hidden costs, download our eBook.
Determining the destination of an item should be the easiest part of freight, but it is often hard and confusing. There is no standardised way of divvying up postcodes into groups, and so each company uses their own unique zoning system. This makes it very hard for you to compare rates between competing freight companies – because one postcode may be included in one company’s metro zone, but in another’s regional zone.
Designed to compensate freight companies for fluctuations in fuel costs, fuel levies are often just another way to generate more revenue. Freight companies usually charge these fees as a percentage of their overall costs, without differentiating between short and long haul trips. They also tend to use out-dated fuel prices where it suits.
Volumetric weight vs. dead weight
Did you know that most freight companies don’t charge for the actual weight – the ‘dead weight’ of your items? Instead, they calculate what is referred to as ‘volumetric weight’, which is based on the dimensions of the item rather than the actual weight. Sometimes freight companies compare a few different calculations and charge the highest of these, even if it does not accurately reflect the weight of the item.
Basic charges and kilo rates
Even with the most attractive kilo rate in the world, you could end up paying a lot more than you think if your consignments are below a certain weight. In this case, customers get charged a basic charge instead of a per kilo rate – and it is often a lot more than you’d expect!
Pallet rates and carton rates
Pallet rates and carton rates are sometimes great alternatives to kilo rates, but it’s important to understand when they are the best option for you. Like kilo rates, they can be misleading and can lead to customers being overcharged.
Most freight companies offer volume discounts, and this is one part of your invoice that actually works in your favour. But be aware – not all freight companies automatically apply the discount, or update it as your volume increases.
Annual rate increases
Justified as a way of covering increasing CPI costs and manpower, freight companies increase their charges to loyal customers every year. Often the increases are between 3% and 5% but could be as much as 15%. It’s important to be aware of these costs and to know what your options are to offset them.
To learn more about these charges, and to read our tips on how to mitigate them, download our eBook here.