The Complete Guide to Understanding Drayage Rates

Posted by Port City Logistics on Dec 16, 2022 11:25:05 AM

Drayage can be one of the most frustrating aspects of moving freight. Shippers would think that moving freight a short distance wouldn't be a complicated endeavor, but drayage can take much coordination. Additionally, drayage fees can add up quickly, turning a short distance into a costly part of the shipping process.

Let's talk about drayage, fee calculations, and ways to reduce those fees. You'll understand drayage in no time at all.

What is Drayage?

Drayage is a term commonly used but only sometimes understood. Dray shipping is retrieving shipping containers, typically from a port, and moving them to their destination. Those inland destinations include shipping hubs, warehouses, distribution centers, and retail stores.

Drayage is the transport of freight over short distances, and another name for it is "the first mile." Tens of millions of containers travel the first mile yearly in the US.

Managing drayage has cost implications and tremendous impacts on the supply chain and inventory logistics. Companies that minimize their stock inventory require on-time deliveries to avoid costly stock-outs and the resulting customer service issues.

How are Drayage Rates Calculated?

Drayage rates include several factors when calculated.

The most common include:

  • The distance from the port to the destination
  • When the freight is delivered
  • The transportability of the shipment; whether a pallet jack can move, forklift, or other methods
  • The type of carrier carrying the freight
  • The type of packaging
  • Shipment weight
  • If special handling is needed
  • When the shipment is handled

Based on those factors, a base fee is typically charged. Accessorial charges for a service outside of standard procedures will also be assessed on the container drayage rates. The accessory charges can add up fast, and preventing them is a significant priority for shippers.

Considerations that factor in the entire cost of the first mile beyond the base fee include:

  • Mileage and time: The time required to make the trip will get you to the linehaul rate, usually the flat rate for the round trip. Still, confirm that the rate is for the entire round trip.
  • Fuel: Expect a fuel charge, usually a percentage of the linehaul rate.
  • Terminal charges: Depending on the ocean terminal the freight enters, there could be an associated fee. Congestion is one factor that might result in a higher fee and the need to go to a specific terminal as opposed to another.
  • Chassis fees: Depending on whether the freight company uses its chassis or a rented chassis, fees will vary and should be confirmed ahead of time. These fees might come as pass-through costs, but there might also be an administrative fee if a pooled chassis or rental needs coordination.
  • Overweight fees: Containers that exceed the legal weight limit could prompt associated overweight fees, like permits.
  • Tolls: If tolls are assessed along the route, they will be passed to the shipper. Additionally, there could be another administrative fee.

Other and often misunderstood fees can add up include:

  • Detention fees: Carriers will typically allot a certain amount of "free time" that will not be charged for when waiting to pick up or drop off cargo. Free time is commonly two hours, although many carriers have moved to one hour, and any waiting time beyond free time has a cost. These fees can range between $60 to $100 an hour.
  • Demurrage fees: If a container is stored at the port or terminal longer than its allotted time, the result is a demurrage fee. The causes for a demurrage fee can vary from delays to shortages. These fees can start at $100 a day after the first three days, then jump to $200 and $300 per day as the container sits at the terminal.
  • Drop fees: A drop fee is charged if a carrier has to drop a container at its destination and pick it up later due to the inability to load the freight right away.
  • Pre-pull: If the container is pulled from the terminal to prevent it from going into demurrage and then is staged for later delivery, there will be a drayage rate to the place of delivery from the staging area.
  • Chassis split: Should the trucker travel to another location due to the terminal not having a chassis, a chassis split fee could be charged to compensate for the extra time and mileage. Expect this fee to run $110.

All of these charges can apply, with some of them running into hundreds of dollars per day. When coupled with extra charges like detention fees, drop fees, pre-pull fees, and tolls, drayage can cost a shipper tremendous amounts of money.

How to Reduce Drayage Costs

As you can see, many variables to drayage can push prices higher and higher, but there are some ways to cut costs.

Be mindful of your packaging

The freight you're moving could have different rates based on packaging. Pallets can be more than floor-load crates, and fragile items that require special handling can have the highest charges. The shipping container you use could cut your costs.

Consolidate shipments

Your freight's hundredweight (CWT) is how your drayage rate will be calculated. Shipments are rounded to 100 pounds, and many carriers could require a 200-pound minimum or 2CWT. If you have four separate 50-pound pieces of freight, shipping them together to meet that 200-pound minimum is a no-brainer. Shipped separately, each of those 50-pound pieces of freight could be rounded up to the 200-pound minimum.

If the rate is $1 per pound, the difference between separate and consolidated shipments in our example is $800 or $200.

Ship efficiently

The fewer batches you can ship, the better. Flexibility with pick-up and drop-off dates is also beneficial. Additional trips are cut if you can unload or load the freight at one time. Working with your carrier will substantially benefit you when finding the optimum days to service your load.

Knowing port volume, equipment availability, and shipment timelines can help structure a strategy to help avoid charges like pre-pull or detention fees.

Ship mixed loads separately

Separate shipments will undoubtedly sound contrary to combining loads, but it can make sense depending on the type of freight. Because the rates can vary based on freight packaging or handling needs, mixing cargo that can ship via crate with freight that requires special handling will mean all the freight is shipping at a higher rate.

Separating the shipments ensures that only the quantity of freight requiring special handling incurs that fee.

Document everything

Documentation is always a great idea when anything involves fees, but this is especially true for drayage. Take photos of your shipments and document everything to provide evidence if a claim is necessary when something goes wrong. Erroneous charges happen, and your documentation can counter them.

Hiring a 3PL partner

Drayage can be complex and has many potential charges that could make the first mile very expensive. A third-party logistics partner will have access to all of the shipping solutions and experience in saving shippers on drayage fees. Turning your freight needs over to a 3PL partner reduces the burden on you to gather information and navigate the drayage landscape.

Save on Drayage Rates With Port City Logistics

Port City Logistics is a full-service 3PL with extensive drayage experience and the results to back it up. Our dispatch team and fleet of drivers move over 90,000 containers yearly, ensuring on-time transport and shipper savings on drayage fees.

Port City Logistics reduces drayage turn times with its warehouses within 5 miles of the Georgia Ports Authority Savannah terminal.

Get a Better Grasp on Dayage Rates with the Right 3PL

One would think the shortest leg of your freight's journey would be the easiest to manage and the least expensive. That short distance is the most challenging due to the coordination required to minimize drayage fees. Those fees add up fast, requiring sound strategies and the flexibility to adjust.

When shippers wish to minimize drayage fees and relieve themselves of the challenges of managing the first mile, they turn to 3PLs with expertise in managing drayage.

Port City Logistics produces results for the shippers that turn to us to coordinate their freight needs, including challenging drayage management. Contact Port City Logistics and let us show you how we can save you money and simplify your freight management.

Topics: drayage rates