5 Factors That Determine LTL Freight Rates

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Open up any book on the art of professional selling and you’ll see that one piece of advice is given again and again: You must know your product inside and out.

There are three reasons why knowing your product is non-negotiable:

  1. You can answer most questions more fluently.
  2. You can solve most of your customer’s problems more exactly.
  3. You look like a professional (and everybody wants to buy from a professional)

Those are just the general reasons. The better you understand what goes into LTL freight rates, the easier it is for you to manage expectations with your customers. Another reason is to prepare your freight shipment processes to get the longest term savings on resources and costs in your transportation department.

LTL freight rates can be confusing. Unlike truckload, which has rates usually based on a per-mile rate or a price per-hundred weight plus a fuel surcharge, many factors regulate LTL rates which will most definitely impact the cost of a shipment.

I’m going to explore 5 of these factors so that you properly understand how LTL freight rates work when you’re connecting with your freight prospects and customers.

  1. Weight
    • LTL freight rates are structured so that the more a shipment weighs, the less you pay per hundred pounds. As the weight of the LTL shipment increases and approaches the lowest weight in the next heaviest weight group, it’ll be rated at the lowest weight category and rate in that weight group.
  2. Density
    • A shipment’s density also determines LTL freight rates. Shippers must know how to calculate a shipment’s density so they can properly describe their goods on the bill of lading.
    • The total weight of the shipment is divided by the total cubic feet to determine the density. If the shipment is palletized, use the dimensions of the pallet, the combined height of the carton and the pallet, and the total weight of the shipment.
    • To determine the dimensions of your shipment, be sure to measure the longest sides including any packaging, overhangs or protrusions. Once density is calculated, you can then figure out the class.
  3. Classification
    • Every piece of freight has a classification within the LTL world and classification is a big driving force to make up LTL freight rates. Classes are published in the National Motor Freight Classification (NMFC) book by the National Motor Freight Traffic Association. NMFTA has established 18 different classes ranging from 50 to 500. The class is determined by product density, value, stow-ability, handling and liability. Lower classes represent very dense freight that is difficult to damage and is easy to handle. Lower classes have lower rates. Conversely, higher classes represent lighter / less dense freight that typically takes up more space. The higher the class, the higher the rate will be.
  4. Distance
    • Typically, the longer the haul, the higher the price per-hundred weight will be.
    • Many LTL carriers only serve a specific geographic region so you must consider how many zip codes a carrier services directly. If a shipment is sent to a location outside a carrier’s normal service area, the trucking company will transfer the shipment to another LTL carrier for final delivery. This is called interlining, a practice that may result in higher costs due to lower discounts and higher minimum charges.
  5. Base Rates
    • All LTL carriers establish their own base rates. These rates are quoted per 100 pounds (aka – CWT) and will vary from carrier to carrier and from lane to lane. The CWT calculation is based on the freight classification.
    • A good fact to point out is carriers will modify their base rates depending on their need for additional volume and increase gross costs for lanes where they have a good balance between trucks and freight.

Congratulations!

You now have more knowledge of LTL freight rates than 99% of the population. You also have more knowledge than 99% of your competitors who are winging it!


2 thoughts on “5 Factors That Determine LTL Freight Rates

  1. James

    I love these articles this way I can sit back and read getting my knife sharper and sharper i definitely need to be in the back office more and plan on it
    I thank you and Maria for working with a person that is a little rough around the edges but I know if I stay in the blog and podcasts I will eventually come out like a seasoned Freight specialist

    Reply

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