TRANSPORT COST CENTER
FOR SHIPPERS AND NETWORK TRANSPORT CARRIERS
Background and Overview
Transport Carriers remain federally regulated with two exceptions: rate-making approval and record keeping requirements to maintain a uniform system of costs accounts to measure and justify freight rates. In 1980 regulated transport carriers were directed by the Interstate Commerce Commission to charge shippers whatever rates were deemed to be fair and reasonable. Carriers could charge whatever market rates dictate, whether adequate or inadequate to cover the full cost of transport that included a profit and a fair return on their invested capital.
After rate making deregulation, thousands of freight brokers and intermediaries entered the freight transport market. Promising lower freight rates to shippers, brokers and intermediaries began matching shippers with transport carriers using load board listings. Soon they began soliciting and contracting with shippers for the movement of partial and full load shipments.
Unable to legally own trucks, the loads and shipments are now contracted for transport by brokers and intermediaries using elaborate and complex Broker/Transport Carrier Agreements whereby determining the real carrier is even difficult for the courts to now determine. The most often used system of offering loads and shipments to transport carriers have been the hundreds of free or subscription based load listing boards. Load boards serve as reverse freight auctions, designed to bid freight rates downward. When the actual transport costs has been determined the general business practice is to use the “transport cost markup” approach. Using this approach, brokerage fees are then added on top of the purchased cost of transport.
Since deregulation, a number of business practices and value added propositions have evolved in the process of offering and reselling the freight transactions to the transport carriers. These business practices and value added propositions now add 10-30% to the purchased cost of transport.
Due to this markup and in the absence of current costs information and transparency between the parties in rate negotiations, shippers can pay higher freight costs and transport carriers are often not recovering a fair and reasonable freight rate for the full cost of transport. Thus driving thousands of transport carriers out of the marketplace each year.
Transport Cost Centers
The purpose of the Transport Cost Centers is to publish transparent current cost per mile information to assist the shipper and
transport carrier in negotiating fair and reasonable freight rates. Each Center has a trip transport cost simulator.
They are benchmarked baseline cost per mile estimates and are cost estimates based upon 8 different Department of
Energy fuel regions and 13 different types of transport equipment. Benchmarked diesel fuel costs by state are
updated weekly based upon reporting truck stops en-route or the Department of Energy published weekly rates.
Additional per mile costs are updated monthly.
Every Shippernet Freight Center has two Trip Simulators:
a Trip Simulator and a Trip Simulator PRO.
The Trip Simulator is a fuel cost trip simulator. The Trip Simulator calculates total miles by state for the trip. Based upon average weekly fuel cost per gallon per state and the average fuel cost per mile the Trip Simulator calculates the total fuel cost by state for the trip. There is no cost to a shipper or transport carrier for the trip simulator.
Trip Simulator PRO
For a nominal monthly charge both shippers and a transport carriers can utilize
the Trip Simulator Pro. The Trip Simulator Pro first calculates the fuel costs in the same manner as the Trip Simulator. To the total trip fuel cost are added additional over-the-road benchmarked operating costs per mile. Five transport cost factors are added. (1) Fuel Costs per mile (2) Over-the-road transport costs are added such as average driver’s wages, driver group insurance, payroll taxes, fringe benefits, tires, repairs, maintenance, and other over-the-road costs. (3) Fixed over-the-road costs are added such as state licenses, public Liability, property damage and cargo insurance, other insurances, interest, and equipment depreciation. (4) Benchmarked shop costs and administrative cost are included. (5) Finally a fair and reasonable per-mile profit is added to arrive at a total benchmarked total cost per mile to transport a full or partial shipment.
The benchmarked transport costs used in the Trip Simulator Pro are independently prepared by a staff of CPAs, Transport Cost Accountants and Specialists. They are guides for transparency in negotiating fair and reasonable freight rates between shippers and transport carriers doing business directly.
Benchmarked costs per mile may be more than or less than current “market” rates. Freight rates may vary and depend on a number of other factors, including daily fuel prices, type of equipment needed, amount of cubic feet needed, weight, pick-up and delivery dates and times, transport distance, origins, destinations, current fuel costs and a number of other variables. They do not include re-positioning empty mile costs, stop and drop costs and other accessorial charges a transport carrier might quote in a freight rate.
Not sure about how to negotiate a rate? Use the “Posted Quote” at a Shippernet Freight Center. Ask for a load or shipment quote. Describe the load or shipment, pickup and delivery requirements, and any specific transporting terms and conditions. Submit the quote. E-mails will automatically be sent to a number of network transport carriers choosing to receive Freight quotes. Wait for a telephone call or e-mail quote.