Calculation of estimated freight costs

For loads and shipments, Freight calculates the estimated freight costs of loads and shipments during load building. For freight order clusters, Freight calculates the estimated freight costs during freight order clustering.

The Freight calculation engine is also used to calculate estimated freight costs for individual order lines of these types:

Sales order
Sales quotation
Freight order

For information on freight cost revenue calculation for order lines or quotation lines, refer to Freight cost revenue calculation at order line entry. The current topic deals with estimated freight cost calculation during load building and freight order clustering.

The calculation engine is automatically activated when the load building process or the freight order clustering process is carried out.

Note

To enable freight cost calculation, you must select the Transport Costing check box in the Freight Rates and Costs Parameters (fmfrc0100m000) session.

The calculation engine calculates the freight costs of the loads and shipments while they are created by the load building engine, or calculates the freight costs of the freight order clusters during the clustering process.

The freight cost calculation process

For loads and shipments, the calculation engine checks if rating must be based on shipments or loads. If rating must be based on shipments, the calculated costs of the shipments of a load are added to calculate the costs of a load.
If rating must be based on loads, the costs of the load are divided by the shipments based on the setting of the Cost Allocation Based On field in the Freight Rates and Costs Parameters (fmfrc0100m000) session to arrive at the costs per shipment.
For clusters, rating is based on clusters. (Because the rate basis is not shipment or load, the calculation engine bases the rating on clusters.)
The estimated costs of the freight order cluster are divided over the individual freight order lines, based on the setting of the Cost Allocation Based On field in the Freight Rates and Costs Parameters (fmfrc0100m000) session.
The calculation engine determines the rate basis number for the shipment, load, or cluster. If the values defined for the rate basis number match those of the cluster, shipment, or load, the rate basis number is allocated to the cluster, shipment, or load.
The rate basis number and several other shipment, load, or cluster attributes, such as carriers or service levels, are passed on to Pricing, which uses this information to retrieve the appropriate carrier rate. See Freight rate retrieval.
The costs are calculated with the rate retrieved from Pricing, the travelling distance derived from the ship-from and ship-to addresses, and the total quantities of the goods to be transported.

Freight cost recalculation

In the Freight Rates and Costs Parameters (fmfrc0100m000) session, the settings of these parameters control freight cost recalculation:

If value Automatic is selected for field Recalculation of Freight Costs, freight costs are automatically recalculated for loads, clusters, and shipments each time they are manually changed. The calculation continues until the loads, clusters, and shipments have reached the status preceding the status that is specified in the Recalculate Load Costs until Status field.

If value Interactive is selected, the user must confirm whether to proceed before freight cost calculation is performed.

Manual recalculation is always allowed. To manually recalculate freight costs for loads, shipments, or clusters after the load building process or the clustering process is carried out, you can activate the calculation process in the Calculate Freight Costs (fmfrc0240m000) session.

Recalculation can be useful for various reasons, such as after a recent change of the rates in the freight rate books. Before you activate the calculation process, you must select the plans, loads, shipments, or freight order clusters for which to calculate the estimated freight costs.

The Calculate Freight Costs (fmfrc0240m000) session is available on the appropriate menu of the relevant sessions. The calculation engine uses the carrier rates to determine the estimated freight costs.

Freight cost redistribution

If freight costs are recalculated or changed manually, the changed freight costs are proportionally redistributed among the shipments and shipment lines of a load. If the freight costs are recalculated or changed for a shipment line, the costs are added up for the shipment and the load.

See Negative freight costs for examples of the ways in which changed freight costs, including any negative freight costs, are redistributed within load structures.

Freight costs are also redistributed if recalculation is not allowed according to the parameter settings and the structure of a load is changed. For example, a shipment is moved to a different load. In this case, the structures of the originating load and the load to which the shipment is moved have changed and therefore, the freight costs are redistributed for both loads.

Example

For loads L1 and L2, the freight costs are distributed based on weight. Shipment S12 is moved from load L1 to load L2. The total freight costs are USD 12000 for load L1 and USD 1000 for load L2.

Both loads have status Actual and in the Freight Rates and Costs Parameters (fmfrc0100m000) session, parameter Recalculate Load Costs until Status is set to Actual and parameter Recalculation of Freight Costs is set to Automatic. Consequently, freight cost recalculation is not allowed for loads L1 and L2. If these parameter settings apply and the status of loads L1 and L2 is Planned, both recalculation and redistribution is performed.

The table shows the shipment structure and the freight cost of each shipment of load L1 before and after shipment S11 has been moved to load L2. After the move, the freight costs of load L1 have been redistributed to shipment S12.

Load L1
Before move			After move
	Freight costs/USD	Weight/Unit		Freight costs	Weight
Load L1	12000		Load L1	12000
Shipment S11	4000	1000 KGS
Shipment S12	8000	2000 KGS	Shipment S12	12000	2000 KGS

The table shows the shipment structure and the freight cost of each shipment of load L2 before and after shipment S11 has been moved to load L2. After the move, the freight costs of load L2 have been redistributed to shipments S11, S21, and S22.

Load L2
Before move			After move
	Freight costs/USD	Weight/Unit		Freight costs	Weight
Load L2	1000			1000
			Shipment S11	500	1000 KGS
Shipment S21	200	200 KGS		100	200 KGS
Shipment S22	800	800 KGS		400	800 KGS

All shipments removed from load

If you remove all shipments from a load, for example by moving the shipments to other loads, LN reduces the costs of the load to 0.00. In such cases, LN does not change the total costs for the relevant plan but redistributes the costs over the loads, shipments, and shipment lines of the plan.