The way transportation industry services are priced can leave shippers feeling lost.
You know this feeling all too well. Sure, you’ve tried to decipher the invoices received from various transportation companies. Heck, you might even subscribe to industry newsletters in the hope of gaining valuable insights.
But no matter how much time you spend managing your company’s freight movement, or how many industry updates you consume, the intricacies of freight pricing continue to allude you. That’s enough of that, don’t you think?
Look, it’s not easy to understand how freight rates are calculated, what’s included in them and how the price you pay relates to the services you receive. Without this knowledge, though, you can wave goodbye to the hope of ever properly managing a transportation budget.
Sayonara, peace of mind. Hello, exhausting confusion.
A single method for pricing freight, on its own, wouldn’t be too much to handle. Simplicity like that would probably save you some time. The transportation industry, however, isn’t known for being easy to navigate.
Too often, questions like “what’s the difference between a daily rate and a rate per mile?” and “are there situations where a daily price is better than per-mile pricing?” fall on seemingly deaf ears.
Here at Anderson Trucking Service (ATS), we believe it’s time for these queries — and all similar questions — to be answered. As a core piece of the national transportation industry for more than 65 years, ATS takes pride in offering customers fair pricing and reliable service. Luckily, with proper management, these things go hand in hand.
From asset-based heavy haul trucking, specialized flatbed and dry van transportation services, to the extensive network of external carriers utilized by ATS Logistics, we’ve spent a good deal of time pricing freight shipments — all the while using per-mile and daily pricing methods.
In this article, you’ll find a comprehensive overview of rate-per-mile and daily rate pricing. The information below will include what each of these pricing tactics serves to accomplish and when they are best used.
With these understandings, you’ll find it far easier to control your transportation spend, budget appropriately and deliver for your customers the way they deserve.
What is a Rate Per Mile (RPM) in Freight Shipping?
In the transportation world, a rate per mile — also commonly referenced as cents per mile (CPM) — is a transportation-pricing method calculated on a per-mile basis. For transportation companies, mileage-based quotes help them ensure that drivers are appropriately compensated for the miles traveled and services they provide.
How is Your Rate Per Mile Determined?
Per-mile freight rates are calculated based on current transportation pricing conditions, the miles a load travels, the pick-up location of a shipment, the delivery location of a shipment, and the specifications of a shipment.
While the rate per mile you receive will fluctuate based on a number of factors, the five largest influencers of your price are:
- Supply and demand in your area of the country.
- Is there a heavy concentration of shippers in your pick-up location that also need a solution? Is there enough capacity available in this area to demand levels? If not, you should expect your price to rise as you compete with other companies for limited truck space.
- Is there a heavy concentration of shippers in your pick-up location that also need a solution? Is there enough capacity available in this area to demand levels? If not, you should expect your price to rise as you compete with other companies for limited truck space.
- The equipment type(s) you need and the supply/demand of them in your locations (origin and destination).
- The urgency of your timelines.
- How quickly do you need a solution? How fast does your freight need to deliver?
- The loaded miles of your shipment (also known as the length of haul).
- The specific requirements of your freight.
- Is your cargo of legal dimensions? Do you need accessorials like tarping, lift-gate or multi-stop services?
As the equipment type(s) you need become more specialized and the urgency of your timelines increases, the cost of meeting these requirements — on a per-mile basis — will rise.
Dry van shipping, for example, is far less expensive per mile than heavy haul trucking can be. 53-foot dry van trailers are the most prominent trailer types on the road today. For this reason, in the vast majority of origin locations, securing one for your freight won’t be much of an issue.
With proper planning, adequate lead-time, quick loading/unloading procedures and flexible delivery scheduling, dry van shipping can be quite affordable.
Related: What Does Dry Van Shipping Cost?
On the other hand, the oversight-intensive nature of heavy haul trucking drives per-mile freight rates up for these shipments. First-run surveys, over-dimensional permitting and escort services — to name a few — are non-negotiable expenses when legally necessary.
For this reason, shipments with these specifications offer a rate per mile far exceeding dry van price points.
Related: What Does Heavy Haul Trucking Cost?
With so many factors used to determine the final rate per mile shippers pay, it’s difficult to predict which will impact yours. That said, great transportation companies have no issues explaining their customer’s pricing in as much detail as they’d like. And, with these understandings — and a bit of optimization over time — shaving dollars off these rates is plenty doable.
It should be noted that fuel surcharges — billed to shippers at current prices — may or may not be included in your per-mile rates. Whether these fees are included will be based on your invoicing preferences.
When Does Per-Mile Freight Pricing Make Sense For Shippers?
For shippers, the use-case for per-mile pricing is subjective. Some businesses prefer to pay their provider for every mile they travel while others like all-in pricing.
That said, when a shipment’s total length of haul exceeds 350 miles distance-based pricing (rather than daily rates) begins to be most effective.
The reason for this shift is that total transit timing on longer-haul shipments — which soak up all of a driver’s daily hours of service (HOS) — can be difficult to predict, making it necessary to do so on a per-mile basis.
Instead of paying for two full days of dedicated service (at roughly $1,200 per day) on a 700-mile load, it can often be prudent to simply pay drivers for each mile they traverse and the fuel they use.
This way, should a driver’s journey (loading, transit, unloading) last less than two full days you’re not stuck with a $2,400 bill. Instead, competitive per-mile pricing — and proper planning — may leave you paying $3 per mile or $2,100 overall.
Note: RPM quotes don’t include additional charges like detention or layover fees. For this reason, in the interest of taking your budget further, it’s important that you expedite your processes and, where applicable, plan for accessorial-influenced price hikes.
What is a Daily Rate in Freight Shipping?
For asset-based trucking companies, getting a minimum amount of production from their assets (trucks, trailers and drivers) is important. Daily freight rates help carriers achieve these ends while, at the same time, giving customers the service levels they deserve.
Daily rates are “all-in” prices quoted based on the minimum amount a carrier needs to receive in order to dedicate their asset to your supply chain for one day. Where RPMs fluctuate based on factors such as length of haul, accessorials and urgency, day rates — for the most part — aren’t as volatile.
How is Your Daily Rate Determined?
Similar to per-mile prices, daily rates are determined based on the specifics of each load.
The ratio between the supply of the trailer-type(s) you need and the number of other shippers looking for that same solution can change the all-in-day rates you receive substantially.
In a market where transportation services are in high demand, the cost of locking down a solution — which could easily be sent elsewhere — will rise.
Additional price factors include the number of customers your carrier has at your destination, the transit timelines you’re looking to hold to and the total time a truck will be dedicated to your freight.
In the end, the price you pay is based on what your trucking company has pinpointed as the amount they need to receive to justify giving you dedicated service for the entirety of their driver’s 14-hour on-duty clock. For this reason, you don’t have to worry about paying additional fees like detention, tarping or layover.
Once again, your daily rates can be adjusted to include fuel surcharge prices — based on your preferences.
When Do Daily Rates Make Sense For Shippers?
Daily rates are great for budgeting purposes. With the proper plan of attack, these quotes give shippers knowledge as to what they’ll walk away paying when all is said and done. In ideal circumstances — such as freight shipping projects — daily rates help shippers take their transportation dollars further than per-mile rates would allow.
Think about it:
By paying a daily rate, you’re given a dedicated solution at a flat fee for the entire day.
This cost does not change depending on the number of loads you run or the miles a driver travels. As such, daily freight pricing is perfect for shippers with multiple stops to make or out-and-back trips to run in one day.
It’s worth noting, of course, that these rates — which make the most sense for shippers and carriers when a shipment needs to travel less than 350 miles — incentivize the companies paying them to have a solid game plan.
If, for example, your company has a series of deliveries to make to customers located along a 100-mile stretch of interstate, planning your dedicated truck’s route before it shows up in the morning will be crucial to maximizing your day’s productivity.
Instead of opting for per-mile pricing and paying for every stop your driver makes, all-in pricing makes this easier to budget for and, in many cases, afford.
As long as you communicate properly with consignees — so that they can be ready for unloading when a truck arrives — utilizing a day rate could save you plenty of money on these loads.
Take Control of Your Transportation Budget
Now that you have a better understanding of what daily and per-mile freight rates are, how they’re different and when each of them is best utilized, let’s look at pricing through a different lens — on the basis of service type.
You know that daily rates are great for shorter-haul shipments (of 350 miles or less) and help transportation projects stay on track and budget. You also understand how receiving a rate-per-mile, when managed correctly, can be more cost-effective than an all-in rate.
But your transportation pricing journey isn’t quite over. You see, depending on the service type your business utilizes, there may be out-of-the-box ways to cut down costs.
Your next step toward realizing these savings is to bone up on the intricacies of transportation pricing.
Luckily, ATS has you covered where this is concerned. Check out the following piece of educational cost-related content and assert control over your shipping budget going forward:
4 Out-Of-The-Box Ways to Save Money on Your Freight Rates
Finally, should you have any questions about how ATS prices customer freight and how this pricing equates to the service levels they receive, don’t hesitate to reach out.
With more than 65 years in the transportation industry, we understand how intimidating shipping prices can seem. We’re always happy to help ease your mind where this is concerned.
