Logistics Management
LSM 730
Lecture 19
Dr. Khurrum S. Mughal
1-1
Rate Types
Line haul rates
Class
>Freight classification of items
>(National Motor Freight Classification of Selected Products)
>Rate tables of tariffs
Contract rates
Drayage (local delivery)
Commodity and contract rates
Specific rates for given shipment sizes for specific products moving
between designated points
Special service charges
Extra charges
Diversion and reconsignment
Stop-off privilege example
6-2
Class Rate Example
Suppose we wish to ship 15,000 lb. (150 cwt.) of wheat flour from New York to
Los Angeles by truck. The trucker offers a 40% discount from the published tariff.
What is the transportation charge?
From the freight classification table, this is item number 1090--00. It shows a
minimum weight of 36,000 lb., which is greater than this shipment size.
Table 6-4
Therefore, the class rating is 55, or less-than-truckload. From the class 100 tariff,
the rate is 6065, or $60.65 per cwt. With a 40% discount, the effective rate is (1.40) x 60.65 = $36.39. The shipment charges are 0.55 x 36.39 x 150 = $3,002.18.
Table 6-5
Should always check to see if shipment can be declared at the
next higher weight break for a lower rate and lower total charges
CR (2004) Prentice Hall, Inc.
6-11
Break Weight
Question Suppose 9,000 lb. of Class 100 merchandise is to be shipped from New York to
Dallas. From Table 6-4, the rate would be $52.21/cwt. However, should the shipment
be priced at the next higher weight break rate of $40.11/cwt. for a lower cost?
RateNext xWeightNext
Break Weight 
RateCurrent
where:
Break Weight = Weight above which the next higher weight break rate should
be used for lower transport costs
RateNext
= Rate for next higher weight break
WeightNext
= Minimum weight of next higher weight break
RateCurrent
= Rate for true weight of shipment.
CR (2004) Prentice Hall, Inc.
6-12
Break Weight (Cont’d)
Answer
Calculate break weight
40.11x100
Break Weight 
 76.82, or 7,682 lb.
52.21
Since the 9,000 lb. shipment size exceeds the break weight of 7,682 lb.,
size as if a 10,000 lb., shipment for a total cost of $40.11x 100 = $4,011.
Otherwise, the shipment would have cost $52.21x90 = $4,699.
CR (2004) Prentice Hall, Inc.
6-13
Stop-Off Privilege Example
Suppose 3 shipments of J=8,000 lb., K=12,000 lb., and L=10,000 lb.
originating at I are to be delivered in the following way.
CR (2004) Prentice Hall, Inc.
6-6
Stop-Off Privilege Example (Cont’d)
First, we compare the costs without the stop-off privilege. This would be to
price as if each shipment is a separate shipment from I. Suppose we know
the rates. Hence,
Load, lb.
Points
Rate, $/cwt.
Charges
8,000
12,000
10,000
I to J
I to K
I to L
3.05
3.35
3.60
Total
$244.00
402.00
360.00
$1006.00
Now, we price with the stop-off privilege. We assume that all the volume
(30,000 lb.) is to be delivered to the farthest stop and we use the rate to
that point ($3.00/cwt.). A small stop off charge of $15.00 is made for each
stop including the last stop. Hence,
Rate,
Load, lb.
Points
$/cwt.
Charges
30,000
I to L
3.00
$900.00
The better
All volume to
the farthest stop
CR (2004) Prentice Hall, Inc.
3 stops at
$15 each
Total
choice
45.00
$945.00
6-7
Private carrier costing
Service Reliability
Short Order Cycle Times
Emergency Response Capability
Improved Customer Contact
Costs:
Fixed Costs
Operator Costs
Vehicle Operating Costs
CR (2004) Prentice Hall, Inc.
6-8
Rate Profiles
By distance
Rates vary with the distance between origin and destination in the
following manner
CR (2004) Prentice Hall, Inc.
6-9
Rate Profiles (Cont’d)
By volume
Rates by shipment size have the following characteristic
CR (2004) Prentice Hall, Inc.
6-10