Why Does Shipping to/from Some Locations Cost Way More
Balance of Trade
Every place a truck goes, it has to get back from. Unless you are hiring a carrier to do a round trip for you (a full load to a location and a full load back from that location), the rate will be based on the carrier’s cost one-way. But the one-way cost will be impacted by the balance of trade and these other factors. In order for the carrier to give you a cost based on one-way. They need to understand the potential to have customers to ship back one-way from that location.
Balance of trade means how much freight is typically shipping from point A to point B and how much freight is shipping back from point B to point A. As an example: Toronto, ON to Los Angeles, CA. Los Angeles has a lot of production as well as major ports that process a huge volume of goods from all over the world. Historically, there is significantly more product shipping out of Los Angeles to Toronto than there is shipping from Toronto to Los Angeles. This means the carrier has fewer potential opportunities for shipments to Los Angeles. As a result, the cost to ship from Los Angeles will be higher than the cost to ship to Los Angeles from Toronto.
In some locations the imbalance of trade can be significant. An area with a heavily service based or tourism-based economy will typically require a lot more goods to sustain their population than they produce to export to other provinces or states. This will mean it will generally cost more to ship into those locations than out of those locations.
Population Density
Some areas that are less populated in the big picture, with smaller economies just might not ship a lot of products in or out. Or maybe there are just not a big volume of products shipping to or from the area you are looking to match up with. In these cases, a carrier can not rely on being able to have opportunities to fill the trailer going in or out of just those locations.
In these cases, the carrier has to plan to either have a local carrier pickup the shipment and bring it to a dock in a more populated area to meet a highway truck or route a highway truck through the area on the way to or from another more populated area. These options will drive up the cost to ship to or from locations of this nature.
High Traffic Congestion
Trucks operate on the roads and when it is hard for trucks to operate efficiently in a specific area because of consistent traffic congestion this means it takes more time out of the day for a driver to make pickups or deliveries in those areas. If an area is known to cause these types of inefficiencies many carriers will charge a congestion fee to try and compensate for that lost efficiency.
High Cost to Operate
Some cities, states or provinces by plan or by circumstance impose a higher cost for trucks to operate within their boundaries. Carriers must take these additional costs into consideration when providing freight rates. Toll roads, higher than average fuel cost or requiring a ferry to access are examples of areas with a higher cost to operate. Carriers must take these things into consideration when providing rates to or from these locations.
There are many factors that impact shipping costs. When preparing your costing for a new customer or supplier it is always a good idea to understand the area and how the location will affect your costing model. The product might be cheaper from one supplier but the freight cost might be double, understanding these impacts can help you make well informed decisions.
Taking a little extra time to do you some research or make a quick call to your service provider about a new customer or supplier location could make a big difference to your bottom line!
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