Contract freight rates: fixing a price by route and weight.
On a route you use every week, asking for prices on every load takes time, and the rate moves from load to load. A rate contract fixes the price with a transporter for a period instead. Here is what one should say, how to price it by weight, how a fuel clause works, and how Rivo runs it.
By Saeed Amin, founder of Rivo ·
When a contract rate makes sense
A contract suits a route with regular loads, where you know roughly how much will move and want the same price each time. Bidding suits loads that come up once, new routes, and times when prices are moving. Most companies use both: contracts for their regular routes, and bidding for everything else.
What a road rate contract should say
- Who it is with, and its first and last day.
- Each route, from which factory or warehouse to which — not only from city to city, because two sites in one city can be far apart.
- The truck type each price is for.
- How the price is set: per truck, or by weight.
- The price of each drop-off after the first.
- Costs that may arise, such as detention for each 24 hours, with their price agreed in advance.
- Whether the price moves with fuel, and by what rule.
- When the bill is paid: the number of days after it is issued.
Per truck or by weight
A price per truck is one price for one truck on a route, whatever it carries up to its capacity. It is simple to check, and suits loads that are much the same each time.
A price by weight is a rate per tonne or per kg, so the bill follows what was carried. It suits loads that vary. The contract must say which weight the bill uses — usually the weight on the bilty.
Weight bands sit in between: a different price per truck for each band of weight, for example up to 10 tonnes, 10 to 20 tonnes, and over 20 tonnes. The weight each truck carries chooses the band.
How a fuel clause works
Diesel is a large part of a transporter’s cost, so a fixed price over many months is a risk: for the transporter when fuel rises, and for you when it falls. A fuel clause moves the price with the published fuel price, by a rule agreed at the start:
- a starting fuel price, and the date it applies from;
- the share of a change in fuel that is passed into the freight price;
- a tolerance: a small change in fuel that is ignored;
- whether falls in fuel are taken off the price, as well as rises added;
- which day’s fuel price counts — usually the day the truck leaves the pickup.
An example, with made-up numbers rather than today’s prices: the agreed price is Rs 100,000 a truck, the starting diesel price is Rs 250 a litre, and the share is 50%. Diesel rises to Rs 275, which is 10% higher. Half of 10% is 5%, so that truck costs Rs 105,000.
How contracts run in Rivo
In Rivo, a contract is made with one transporter, and lists its prices route by route between your own saved addresses. Each price can be for a truck type, a weight band and a kind of goods, and is set per truck or by weight, per tonne or per kg. Prices can be pasted in from a spreadsheet. The transporter agrees to the contract in Rivo. To change a contract once it is sent, you make a new version, and the old one keeps pricing until the new one is agreed.
When you post a load on a route a contract covers, Rivo lists the contracts that fit, cheapest first with today’s fuel included, and you choose who gets it. There is no bidding, and it uses no credits. The transporter accepts or declines; if it declines, you give the load to another contract or put it out to bid.
A contract with a fuel adjustment holds the fuel type, the starting price and its date, the share, the tolerance, and whether falls come off the price. Rivo reads the fuel price PSO publishes, and uses the price on the day the truck leaves the pickup. Before then you see an estimate at today’s price; on the bill, the fuel adjustment is a line of its own, with the fuel price and the date it used.
Costs such as detention are agreed in the contract with their price. The transporter claims one on the truck when it happens, at the agreed amount, and you approve it; on a contract load, only the agreed costs can be claimed. Extra drop-offs are added at the contract’s price.
The transporter’s bill is built from the agreed price — or the bilty weight times the rate — plus the approved costs and the fuel line, and the contract’s payment terms apply. Each contract shows the work given under it. After that, a contract load runs like any other in Rivo: its own truck record, documents, gate and weight check. Sea freight works the same way, with a rate card for each trade lane agreed with a freight forwarder.
Rivo does not set contract rates by tender: you agree them with the transporter and enter them. It does not renew a contract or remind you when one ends; to renew, you make a new version. The fuel adjustment uses PSO’s prices in Pakistani rupees and applies to road contracts.
Read next: Freight bidding · Goods transport · Pricing