Explain why transport rates typically vary by 1) the weight of the shipment; 2) the distance a shipment is transported; and 3) the value of the transport service. Provide an example of how these variables affect a shipping rate.
Transportation rate depends on various factors such as product characteristics, weight of the products, distance and value of the transport service e.g. whether it is by air, land or water. There are different kinds of products e.g. chemicals, petroleum products and machine parts that need to be transported and rates would vary for all of them according to their makeup. A product weighing 200 pounds may cost $100.00 per hundredweight, while 1000 pounds of this product going to the same destination may only cost $50 per hundredweight. Higher dense products would be charged lesser compared to low dense products because the amount of space required for the same weight would be much larger in the case of lower dense product as compared to high dense product. But this method of calculating transportation rate based on the product characteristics, weight, and distance could become very complex as there could be ‘n’ nos. of combinations and this could be very tricky to calculate and keep track of so many transportation rates. So, a simpler method of rate determination needed for the transport community. This was accomplished through the class rate system, which simplified each of the three primary rate factors—product, weight, and distance. One widely used system for simplifying the number of products is the National Motor Freight Classification (NMFC), which has 18 separate ratings, or classes, from 500 to 354; the higher the rating, the greater the relative charge for transporting the commodity.