freight rate
Quick Summary
A freight rate is the charge a carrier sets for transporting cargo, typically published in a freight tariff. This rate is determined by balancing the value of the service to the user against the cost of providing the service.12
Factors influencing freight rates include:
* Value of Service: Higher-valued products can generally bear higher transportation costs, helping to subsidize the carriage of less valuable goods.2
* Cost of Service: Carriers aim to charge more than their operational costs, which include fixed overhead and variable expenses.2
* Demand: The difference in a commodity's value between two markets can express the demand for its transportation.3
* Time Sensitivity: For perishable or time-sensitive goods, faster transportation modes may be used to reduce inventory holding times.3
Carriers may also offer lower rates during off-peak periods to encourage utilization and incentive rates for larger shipments.2
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