The price on your freight invoice is different from the actual weight you have measured...sounds familiar? This could be an error in your freight invoice, but it’s equally possible that the freight calculation is made between the actual weight and the chargeable weight.
Chargeable weight is a calculation method used for different forms of international transport services. Being a (large) shipper, you cooperate with multiple suppliers and other participants in the supply chain on a daily basis. The bigger the company, the more difficult it is to correctly connect your transportation partners. The fact that each transport service has its different way of calculating the weight that is used, means in practice a big hassle for shipping companies.
Before moving on, let's have a quick look at the different kind of dimensions that logistics service providers use for making a freight quote for your shipments:
Actual weight or Gross weight
The weight of the goods, including all packaging. It is expressed in the same units as the net weight and you can identify it by the initials GW.
Volumetric weight and dimensional weight
Dimensional weight, also known as volumetric weight, is a pricing technique for freight transport (including courier and postal services), which uses an estimated weight that is calculated from the length, width and height of a package. The volumetric weight is usually expressed in cubic meters.
The chargeable weight is the highest weight calculated between the actual weight and the volumetric weight.
Cotton wool is shipped by AIR. Applicable rates are per kg. Obviously, the freight has small weight but occupies a lot of space (CBMs) in a vessel. So, if to use actual weight for freight cost calculation, the price for the shipment will be low and therefore not profitable for the logistic service provider.
For such cases “Volume-to-weight” Conversion rules were established:
AIR: 1 CBM = 167 kg
ROAD: 1 CBM = 333 kg
SEA: 1 CBM = 1000 kg
1 LDM = 1750 kg (or 1850 kg; depends on agreement between shipper and carrier)
How come we are paying too much for freight transportation?
Our recent deep-rooted observations as a Freight Audit Provider showed that most clients negotiate contracts and run tenders to improve rates. Unfortunately, shippers occasionally and unknowingly agree on higher prices than necessary with their logistics service provider. A recent analysis led by ControlPay raised a question whether actual weight or chargeable weight should be used. In the normal run, clients agree on the chargeable weight for cost calculation of their freight invoices.
Here are some more real case examples below, showing that the difference in costs also depends on the calculation method used and price structure. This has a major influence on your final freight invoice.
Freight costs: Case 1:
AW (actual weight) =1285 kg,
LDM (loading meter) = 3,
CW (chargeable weight) = 3*1400 kg =4200 kg
Minimum calculation method, rates per 100 kg
We take the current weight bracket (3001-5000 kg) = 4200/100 kg * 3.42 = 143.64 EUR
The next weight bracket (5001-7500 kg) – 5001/100 kg * 2.64 = 132 EUR + FS (out of two the lowest cost is applied)
For the AW 1285 kg the calculation would be as followed:
The current weight bracket (1001-2000 kg) = 1285/100 *7.23 = 92.9 EUR
The next weight bracket (2001-3000 kg) = 2001/100 * 4.83 = 96.6 EUR + FS (92.9 EUR would be applied)
The difference in the transport cost is 132 - 92.9 = 39.1 EUR + Fuel Surcharge.
Freight costs: Case 2:
AW (actual weight) =11089 kg,
CBM (cubic meters) = 72,
CW (chargeable weight) = 72 *300 kg= 21600 kg
Flat calculation method
For the CW 21600 kg, the corresponding rate is 444 EUR + FS
If to take the actual weight 11098 kg it will be 357 EUR + FS
The difference in the transport cost is 444 - 357= 87 EUR + FS
Freight costs: Case 3:
AW (actual weight) = 5490 kg,
LDM (loading meter) = 9.6,
CW (chargeable weight) = 9.6 *1750=16800 kg
Regular calculation method, rates per 100 kg
16800/100 kg* 7.92 = 1330.56 EUR + FS
If we take the actual weight the precalculation will be 5490/100 kg * 10.8 = 592.92 EUR + FS
The difference in the transport cost is 1330.56 - 592.92 = 737.64 EUR + FS
As the previous examples show, the difference between transportation costs can be significant, depending on the calculation method. Is this different within your company, or maybe worth to check?! For more information on this topic, or other freight invoice / freight audit related questions, please feel free to contact us via firstname.lastname@example.org. We are more than happy to provide you with insights or assist you in the process of reducing freight spend.