Scope of Cost Model Calculation
Below cost categories are considered for calculating Should Cost on Road Freight:
1) Fuel: Cost of fuel used for driving on the route (one-way); calculated based on fuel consumption, lane distance and fuel cost.
2) Labor: Employer cost (with taxes) of driver serving a shipment (one-way); calculated based on average yearly salary and estimated hours worked through the year.
3) Toll: Fees paid for using toll roads, bridges, and tunnels. Includes both domestic and international toll charges where applicable, electronic toll collection fees, and manual toll payments.
4) Maintenance and Repair: Expenses related to the upkeep and fixing of vehicles, including routine maintenance, emergency repairs, parts replacement, and servicing costs to ensure vehicle reliability and compliance.
5) Tyres, Lubricants, AdBlue: Costs for tyres, lubricants, and AdBlue (a diesel exhaust fluid). Includes purchase, installation, and disposal of tyres, various lubricants for engine and other parts, and AdBlue refills.
6) Depreciation: The reduction in value of vehicles and equipment over time. Calculated annually, accounting for wear and tear, age, and usage of the vehicles.
7) Vehicle Taxes: Taxes and fees imposed on vehicles used for freight transport. Includes road taxes, registration fees, environmental taxes, and other regulatory fees.
8) Other: Miscellaneous costs that do not fit into the other specific categories. Covers unforeseen expenses, administrative fees, parking fees, and other ancillary costs.
9) Handling and Waiting: Cost of driver time for time of cargo loading and unloading includes salary, carrier's profit and overhead, truck depreciation. Fuel for running truck stationary not included; does not include cost for equipment or additional labor (other than driver) used for loading/unloading.
10) Ferries: Fees for transporting vehicles via ferry services. Where applicable, it includes ticket costs, reservation fees, and additional charges for oversized vehicles or hazardous materials.
11) Overhead: General business expenses not directly tied to specific trips. Includes selling and general administration costs, such as office rent, utilities, insurance, communication expenses, and administrative staff salaries.
12) Profit: The financial gain realized from freight operations after all costs are deducted, represents the margin of freight forwarders to cover risks and provide return on investment.
13) Backhaul: Additional costs associated with the return trip of a vehicle; typically including the cost implications of returning part of the outbound distance empty (deadheading).
Note: In addition to selection parameters chosen in the dashboard, there are key assumptions and parameters used for should-cost calculations. If you'd like to dive deeper into the should-cost for your specific lane or region, please contact the Cost Engineering team for assistance.
Glossary
Key terms and definitions used throughout the FreightFlow dashboard.
Shipment Types
TL (Truckload): A full truckload shipment where the shipper books the entire trailer. Best for large shipments (typically 10,000+ lbs or 10+ pallets). You pay a flat rate for the whole truck regardless of whether it's completely full. Generally the lowest cost per unit for large volumes.
LTL (Less Than Truckload): A shipment that doesn't fill an entire trailer. Multiple shippers share space on the same truck. Priced by weight, freight class, and number of pallets. Best for shipments between 150–10,000 lbs. Cost per unit is higher than TL, but total cost is lower for smaller shipments.
Reefer (Refrigerated): A temperature-controlled trailer used for perishable or temperature-sensitive goods (food, pharmaceuticals, chemicals). Costs more than standard dry van due to fuel for the refrigeration unit and specialized equipment. Typically 15–25% premium over standard TL rates.
FTL (Full Truckload): Synonym for TL. Used interchangeably in the dashboard to refer to a full truckload shipment.
Equipment Types
Van (Dry Van): Standard enclosed trailer — the most common equipment type. Used for non-temperature-sensitive, non-oversized freight. Typically 53 feet long with ~2,500 cubic feet of space and 44,000–45,000 lbs capacity.
Reefer (Refrigerated Trailer): Enclosed trailer with a built-in refrigeration unit. Maintains temperatures from -20°F to 70°F. Used for perishable goods. Slightly less cargo space than dry van due to insulation and cooling unit.
Flatbed: Open trailer with no sides or roof. Used for oversized, heavy, or irregularly shaped cargo (machinery, construction materials, lumber). Requires tarping and securing. Generally more expensive due to specialized loading/unloading requirements.
Freight Class
NMFC Freight Class (50–500): A standardized classification system by the National Motor Freight Traffic Association. Determines LTL shipping rates based on four factors: Density (weight per cubic foot), Handling (ease of loading), Stowability (how well it fits with other freight), and Liability (value and fragility). Lower class = denser, easier to handle = lower cost. Examples: Class 50 = sand, bricks (50+ lbs/ft³). Class 100 = car parts, furniture. Class 500 = ping pong balls, gold dust (<1 lb/ft³).
Cost Metrics
Should Cost: A bottom-up cost model that estimates what freight should cost based on fundamental cost drivers (fuel, labor, tolls, depreciation, etc.) for a given route. Used as an internal benchmark for negotiations.
Market Rate: The current non-negotiated baseline price from CH Robinson's API. Represents what the open market is charging for a given lane. Useful as an external benchmark — actual contracted rates are typically lower.
Supplier Quote: The actual price quoted by your carrier/supplier for a specific lane. Comparing this against should cost and market rate reveals negotiation opportunities.
Gap to Should Cost (GTSC): The percentage difference between a rate (market or supplier) and the should cost benchmark. Formula: (Rate − Should Cost) / Rate × 100%. A positive GTSC means the rate is above should cost — a potential savings opportunity.
Cost per Mile / Cost per km: Total freight cost divided by route distance. Key metric for comparing lanes of different lengths on an apples-to-apples basis.
TCO (Total Cost of Ownership): The total freight cost across multiple truckloads and units. Calculated as: Should Cost × Number of Truckloads. Cost per unit = TCO / (Truckloads × Units per TL).
Tip: Hover over the ℹ️ icons next to Service Type, Equipment Type, and Freight Class in the dashboard filters for quick definitions.
Data Sources
Should Cost Data
Regional benchmarks providing high-level cost estimates based on distance, fuel prices, labor rates, and operational costs. Updated periodically. Best for strategic planning and establishing baseline cost expectations.
Market Rates
Real-time, granular market rates for specific routes via API integration. Updated with current market conditions. Best for tactical negotiations and validating actual quotes against market benchmarks.
Combined Approach: By comparing Should Cost (what it should cost based on fundamentals) with Market Rates (what the market is actually charging), you can identify negotiation opportunities and make data-driven freight decisions.