Cost saving is important for all businesses, and good budget management means looking at ways to reduce expenditure. But some costs can have disastrous results if cut.

You’ve guessed it… Freight rates are one of those costs.

Cheap freight rates might look appealing, but there are hidden dangers. Let us dig down into what makes cheap freight rates not worth the risk.

What Impacts Freight Rates

Freight rates, a huge part of how much it costs you to transport your goods from A to B, are complex and constructed from several factors. 

Let’s take a look at the most important elements of freight rates.

Fuel Rates

Rising fuel costs increase the cost of moving freight around the world, no matter the method of transportation. Greener shipping alternatives are a hot topic, and there are already more sustainable shipping solutions you can choose – such as LCL shipping, intermodal shipping and rail freight – to ship smarter.

Read our blog about green freight here. 

Exchange Rates

Exchange rates change, and that means the value of different currencies fluctuates. 

Behind many freight shipments sit multiple international payments, and no one wants to lose out on money. Most carriers use the Currency Adjustment Factor (CAF) method and most charge between 1% to 10% of freight rates. 

You can read more about the importance of exchange rates here. 

Distance & Destination

How far is it between your shipment’s point of origin and destination? The length of the journey is a significant factor in determining your freight rates, as well as the destination itself.

If the destination is difficult to get to or has poor infrastructure, for example, it’s rendered pretty inaccessible and getting your consignment there safely involves higher costs. 

Mode Of Transport

Each mode of transport, whether it’s air, sea, rail or road, comes with a significantly different pricing structure.

Air freight is famously the most costly, and sea freight tends to work out cheapest of all for large-volume shipments travelling a fair distance. 

The cheapest way of getting your goods from A to B largely depends on the nature and volume of what you’re shipping. For a comparison of sea and air freight, click here. 

Weight & Size

Heavier, bulkier or awkwardly shaped goods can be more expensive to ship because they involve specialist infrastructure or enhanced handling requirements. They can also take more time to prepare, package and process.

Quality Of Service

You get what you pay for, don’t you? Super cheap freight rates might be a sign that the company you’ve chosen or the services they offer are far from reputable, rendering your cargo at risk and potentially causing serious problems down the line.

Cheap At The First Glance

So you’ve found a cheap rate, and you’re jumping up and down in excitement.

Hold your horses.

Cheap freight rates are often only affordable at first glance. They usually only include the very basic aspects and don’t account for important elements that will ensure your cargo is well protected.

Often, you’ll be hit with surcharges and add-ons when it’s too late to change supplier. These can include…

• Additional handling fees. These charges cover the processing and transportation of particular packages. 
• Customs clearance charges. If your goods are travelling internationally, they will need to clear customs. There’s no two ways about it. 
• Destination charges are fees charged by the destination port of your cargo, covering things like crane lifts and terminal fees. 

Poor Service

Remember… Offering something cut price is only possible if you cut corners.

You simply cannot provide a stellar service when you’re charging low rates. This is because your operating costs will also be considerably lower, destroying your ability to provide a valuable service that holds your customers and their cargo at its core. 

And some businesses won’t sacrifice their profits, so the cuts will come from other areas.

Opting for a company offering cheap freight rates means your shipments might be slower, less reliable or fraught with problems such as lost or incomplete shipments. And this leads us nicely on to…

Crappy Insurance Cover

One of the easiest corners for shipping companies to cut is insurance coverage. 

Cheap freight rates may include cover, but it is likely to be very low with the option to ‘upgrade’ it. Not only will upgrading the level of cover set you back extra cash, but without it, you run the risk of having no comeback if your freight is lost or damaged.

Balancing Cost And Quality

Cheap freight rates aren’t the answer. But it comes down to what you value – a few quid saved on freight rates or the knowledge that your cargo is in safe hands.

If you spot a rate that is far lower than any other, consider it a red flag. Freight quotes that are undercut by a significant amount means something vital might be missing, and your freight may not be looked after.

The alternative? Trusted, customer-centric shipping companies like Millennium price competitively but ensure they can provide quality service and keep their customers satisfied.

There’s No Such Thing As Cheap Freight Rates

The hidden costs of cheap freight rates don’t stay hidden for long. 

Freight rates are influenced by a complicated array of interrelated factors. Understanding what goes into freight rates can help you to make smarter choices about your shipping needs, save you money and ensure you don’t put your business in jeopardy by falling into the cheap freight rates trap. 

Looking for more advice on shipping solutions? Don’t hesitate to check out our website and get in touch with Millennium today.