Freight Cost Calculator

Setting it out

Freight cost depends on the mode, and each mode charges on a different basis. Ocean charges per container or, for less-than-container loads, per cubic metre or metric tonne, whichever is greater. Air charges on chargeable weight, the greater of actual weight and volume ÷ 6,000 in kilograms per cubic centimetre. Road charges by weight and distance.

The comparison across modes has to include the whole door-to-door cost and the capital cost of the transit time, not just the freight rate, because the modes differ far more in speed than in headline price.

A real example

1,000 units at 3.4 lb each: 1,542 kg, 12.5 cubic metres. By sea in a shared container: $2,400 door to door, 32 days. By air: chargeable weight is the greater of 1,542 kg and 12.5 m³ ÷ 0.006 = 2,083 kg, so 2,083 kg at $4.20 is $8,749, five days.

Air costs $6,349 more, $6.35 a unit, which is 24% of the $26.10 unit cost. Against that, it releases 27 days of transit, worth 27 days of carrying cost on $18,000 at 25% a year: $333.

So air loses by roughly $6,000 on a routine restock. It wins when the alternative is a stockout: 27 days of lost sales on a product contributing $31.90 at 40 units a week is $4,900, and if the stockout would have been longer, air pays for itself.

The usual mistakes

Ocean freight quotes are frequently for port-to-port, and the door-to-door figure adds origin haulage, terminal handling at both ends, customs clearance, destination haulage and any demurrage. Those can add 40% to a headline sea freight rate.

Air quotes on chargeable weight catch out anyone shipping light bulky goods. At a 6,000 divisor, anything under 167 kg per cubic metre bills on volume, and most consumer goods in retail packaging are well under that.

Using the result

Quote everything door to door and insist that quotes name what is excluded. Comparing a port-to-port sea rate against a door-to-door air rate is the single most common way freight decisions get made on the wrong numbers.

Then use a mix rather than choosing. Sea for the bulk of a restock and air for enough units to cover the gap is usually cheaper than either alone, because it buys availability without paying air rates on the whole order.

Volatility and how to plan around it

Container rates have moved by a factor of five within single years in the recent past, and the swings are driven by capacity, canal access and demand shocks rather than by anything a shipper can forecast. A landed cost calculated at one point in the cycle is simply wrong at another.

Two responses help. Recalculating landed cost and re-checking prices whenever freight moves more than about 20% keeps the catalogue honest. And quoting an annual contract rate with a forwarder, where volume supports it, converts the volatility into a known number for a period.

The third is to stop treating freight as a fixed percentage of goods value, which is how most businesses model it. It is a cost per cubic metre and per kilogram, which means it hits cheap bulky goods far harder than expensive compact ones, and a catalogue that models it as a percentage systematically misprices both ends of its range.