Truck freight calculation: a 10-step walkthrough

Without a doubt, knowing how to calculate truck freight is one of the main headaches for fleet managers. That is why we have gathered the key information to make this task clearer and improve your results.

First of all, it is important to note that getting the freight calculation right will not necessarily solve all of the operation's financial problems. Before that, you need to look at the whole picture and understand spending on fuel, tires, maintenance, tolls, taxes and other costs that come up before, during and after the trip.

With that foundation, you can plan better, reduce surprises and make management more efficient. This is where the importance of calculating truck freight correctly comes in, using known criteria and up-to-date data.

Since there are many details in this calculation, there are, to the same extent, many chances of making a mistake along the way. So understanding what goes into the price of freight transport and what really needs to be included in the calculation is the first step.

What should you consider for the calculation?

In Brazil, the ANTT, the National Land Transportation Agency, maintains the National Minimum Freight Rate Policy. The minimum rates defined in the agency's regulation are binding.

This does not mean there is a single, across-the-board price for every operation. Under the current legislation, the minimum rate considers the type, nature and specific characteristics of the cargo transported; the distance traveled; and the vehicle configuration and vehicle type, the number of axles and the load capacity of the combination used.

In practice, the ANTT table should be used to look up the minimum rate that applies to the operation according to these criteria. From that point on, each carrier and each fleet still needs to do its own calculation, add up its costs and set a final price that covers the trip and preserves the margin.

In addition, there are many other factors that must be taken into account when calculating truck freight. These include general fleet management tasks, such as preventive maintenance, the driver's meals during the trip, tolls, fees, taxes, risk management (GRIS) and, of course, the profit margin.

Want to see this in your fleet? Talk to a Prolog specialist

How to calculate truck freight: step by step

Now, getting down to how to calculate the freight price, you can organize this calculation in ten steps. However, keep in mind that each step requires gathering a range of information about the cargo, the route, the fleet and the operation's costs.

In other words, have a complete, up-to-date management system on hand, along with the commercial and operational data that will support the charge.

1. Collect information about the cargo

This is where the freight calculation begins. It is the moment to gather the information needed to reach the correct price at the end of the task. Cargo information can include the invoice value, weight, dimensions, type of goods, volume occupied and special handling requirements for transport.

2. Note down information about the delivery

At this point, you should have the route planning on hand. After all, you need to know the distance that will be traveled for the delivery, the cargo's destination, whether advance scheduling is required, whether there are traffic restrictions and what costs may come up along the way.

3. Find out which fees will apply to the delivery

One of the important fees at this stage is ad valorem, which helps cover risks of the transport operation related to the goods. The amount can be set considering aspects such as the cargo value, the product profile, the risk involved, the vehicle type and any compensation in the event of a loss.

It is important not to confuse ad valorem with weight-based freight. Weight-based freight is another component of the calculation and is tied to the weight or cubage of the cargo, as well as the distance traveled. Ad valorem, on the other hand, looks at the value and risk of the goods being transported.

Remember that this number varies according to the details of each load. For example, some goods may be lighter and travel a shorter distance but carry a higher risk of theft. That makes the fee go up.

In addition, ad valorem can have one amount on the outbound trip and another on the return, depending on the goods transported on each trip. That is why this part of the calculation deserves special attention and should not be treated as a fixed fee for every case.

4. Assess whether the GRIS fee is needed

Although the GRIS fee is part of the risk management logic, it is important to assess it separately to determine whether or not it should be charged. After all, not all goods need this extra charge.

To explain further, GRIS is a Brazilian abbreviation for Risk Management (Gerenciamento de Riscos). So, if transporting the cargo involves high risks, such as theft, accidents or explosions, as in fuel transport, the fee should be added. If the risks are very low or nonexistent, it may not be charged.

According to the NTC (Brazil's National Cargo Transport Association), the suggested GRIS is 0.3% of the cargo value. Even so, the carrier should assess whether this benchmark makes sense for the profile of the operation, the route and the goods.

5. Assess the type of cargo

Here, cargo cubage should be considered as the basis for setting this part of the freight price. But what is it? After taking the measurements of the goods, you can calculate the volume of the cargo and understand the space it will take up in the transport truck.

Depending on how much cargo fits in each truck, the freight price will be different. Whether the vehicle carries a single item or has the capacity to carry twenty units, logically, the prices of these trips will be different to ensure a fair price for both parties.

6. Estimate weight-based freight with a rate table

Although it is very common to use the weight of the delivery, the cubage value can also be used for this calculation. Either way, it will be the weight or the cubage, together with the distance traveled, that helps determine the weight-based freight result.

This step is different from the ad valorem analysis. While ad valorem considers the value and risk of the goods, weight-based freight helps pay for the transport according to the space, weight and distance involved in the operation.

7. Assess the dispatch fee and value-based freight

The dispatch fee is a fixed amount that your carrier company sets to cover administrative and operational activities of logistics operations. Value-based freight, in turn, is calculated from the cargo value and the value-based freight percentage suggested by the NTC.

8. Calculate the base freight

This is where you bring together the amounts gathered so far, that is, you add up:

• the weight-based freight;
• the dispatch fee;
• the value-based freight;
• the GRIS.

This sum forms an important base, but it does not yet close the calculation. After it come the additional fees that apply to the operation and the carrier's profit margin.

9. Calculate the additional fees

Some fees need to be calculated separately, such as the traffic restriction fee. For this reason, go back to the list of fees gathered in step 3 and do all the necessary calculations before reaching the last step of the truck freight calculation.

It is also worth checking toll costs, scheduling requirements, urban restrictions, route-specific expenses and any condition that changes the real cost of the delivery. The goal is to keep a small amount, forgotten when putting the quote together, from eating into the operation's margin.

10. Add up all the amounts

Finally, put all the amounts together to determine the final price of this freight. Remember to add the profit margin and to check whether the calculated amount respects the minimum rate that applies to the operation, when the operation falls under the ANTT policy.

Technology alternative

To make this process easier and faster, there are already various tools where you fill in the amounts and the calculation is organized more easily. Just search and find the system that best fits your needs.

Even with support tools, care for data quality remains essential. If weight, cubage, distance, fees or fleet costs are out of date, the result will also come out wrong from the start.

Importance of a correct calculation

Accounting for all transport costs and still making a profit so you do not end up at a loss is essential. That goes without saying, right?

So, to set a fair price for the carrier and for the customer, you need to know all the details that go into the calculation, as we discussed above. The calculation should not look only at what the market is charging, but also at what your operation actually spends.

Another thing: sometimes you may feel the need to lower or raise your price just to compete and match your competitors, but that is not the recommended path. If the carrier charges without knowing its own costs, it may operate at a loss even when the trip seems full.

The best path is to organize the cargo, route, fleet and fee data, check the applicable minimum rate and build a price that covers the operation with a margin. That way, the truck freight calculation stops being a commercial guess and becomes a management decision.