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 freight companies.
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 less than truckload shipments in order to get the longest-term savings.
Understanding These 7 Factors for Less than Truckload Rates
- 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.
- 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.
- Distance: In general, a longer haul means a higher price per-hundredweight. Be aware of whether your LTL truck company 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.
- 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.
- 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.
- 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.
- 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.
Mastering Rate Dynamics with DTS
Comprehending the multifaceted nature of Less-than-Truckload (LTL) freight rates is essential for optimizing shipping strategies. Despite their intricacy, LTL services offer a tailored solution for shipments that fall between parcel and full truckload sizes. By understanding factors such as density, weight, distance, base rates, freight classification, minimum charges, and accessorials/surcharges, businesses can better prepare their shipments and achieve long-term savings. With the LTL market estimated at $35 billion, leveraging this freight shipping service effectively can significantly benefit businesses of all sizes. For further assistance in navigating the complexities of LTL shipping, reach out to Diversified Transportation Services today.
