7 Factors That Determine LTL Freight Rates

The Less-Than-Truckload (LTL) market is estimated at about 35 billion dollars
7 Factors That Determine LTL Freight Rates

There's no skating over the truth: Less-than-truckload (LTL) freight rates can be confusing. While standard truckload freight rates are typically only based on a per-mile rate or a price per-hundredweight with a fuel charge, there are many factors that impact LTL shipping services.

Despite the more confusing rates, LTL shipping services are the perfect solution for smaller shipments that are too large to be a parcel and too small to fill an entire truckload. By knowing these key factors that go into determining LTL freight rates you will be able to better prepare your freight shipments in order to get the longest term savings.

  1. Density: In LTL freight services, density is defined as the space a shipment occupies in relation to its weight. You can find your shipment's density by dividing the weight of the item in pounds by the volume in cubic feet.
  2. Weight: The more your shipment weighs, the less you will pay in LTL freight rates per hundred pounds. The freight rates do classify shipments into weight groups, so be aware if your shipment is approaching the lowest weight of the next highest group.
  3. Distance: In general, a longer haul means a higher price per-hundredweight. Be aware of whether your LTL carrier only serves specific zip codes. If your destination is outside of their service zone, they may transfer the shipment to another carrier, resulting in a higher cost for you.
  4. Base Rates: Each LTL carrier establishes its own LTL base rates, which they quote per 100 pounds, or CWT. The CWT calculation is in turn based on the volume, gross cost, and freight classification.
  5. Freight Classification: The freight class is a major factor in determining LTL freight rates. The National Motor Freight Classification system determines each shipment's freight class. The system has 18 different classes from 50 to 500 and uses product density, stowability, value, handling, and liability to classify shipments.
  6. Minimums: A carrier won't charge below the cost of its absolute minimum charge (AMC). In general, minimums at LTL carriers are increasing, as the costs a carrier faces for a minimum charge shipment outstrip the costs for heavier shipments.
  7. Accessorials/Surcharges: These charges come from the extra services LTL freight companies perform beyond the standard dock-to-dock pick-up and delivery. The most common accessorial charge is a fuel surcharge, but other common charges include lift gate service, residential pickup or delivery, and limited access location delivery.

The LTL market is huge, as it is estimated at $35 billion, but it is also an incredibly useful service. Contact Diversified Transportation Services today to learn more about how this freight shipping service can benefit you.

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