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LTL Savings You Don't Want To Miss

May 13, 2015

Looking for ways to cut your LTL shipping costs? You’re not alone. With shipping rates rising, most shippers are looking for ways to contain or reduce shipping costs. If shipping by the truckload is not an option, then you may want to make sure you don’t miss out on utilizing Deficit Weight.

 To understand how this works we first need to take a look at how shipping costs are calculated. Unfortunately this is not the simplest of tasks. Even calculating a base rate is a complex multi-step process. And this is only the beginning of getting to the actual shipping charge. The final cost can include accessorial charges and fluctuating fuel surcharges.

LTL freight charges are based on many factors. They include:

1. The Distance the shipment is moving. Unfortunately this is not as simple as it sounds. Distance is affected by the routes of trucks going where you want your shipment to go.

2. The Weight of your shipment. Shipping rates are set up in such a way that the price per hundred pounds decreases as your shipment weight increases. The NMFC’s published weight breaks are:

0-499 lbs
500-999 lbs
1,000-1,999 lbs 
2,000-4,999 lbs 
5,000-9,999 lbs
10,000-19,999 lbs 

3. The Base Rate. All LTL carriers establish their own base rates.

4. The Freight Classification.Classes are published in the National Motor Freight Classification (NMFC) book by National Motor Freight Traffic Association (NMFTA). There are 18 different classes determined by:

a. Density
b. Value
c. Stow-ability
d. Handling
e. Liability.

5. Accessorial Charges. Charges for extra services performed by the carrier that goes beyond the typical dock to dock or business to business pick-up and delivery.

6. Fuel Surcharges.

Now that we have a general idea of the factors involved in calculating shipping charges we can look at deficit weight and how a shipper might be able to take advantage of this technique to save on their shipping costs.

Deficit Weight

Here’s how deficit weight works. If it will be less expensive, the weight of a shipment will be rounded up to the next weight break and that higher rate will be applied. The resulting shipping cost will be lower. 

For example:

If your shipment weights 1,795 lbs and the 1,000 lb weight break charge is $35.00 per 100 lbs (cwt) and the charge at 2,000 lbs is $31.00 cwt. The shipment would be rated at 2,000 lbs to take advantage of the lower overall shipping cost for this shipment.

Fortunately LTL carriers make this calculation and apply it automatically if the shipping cost will be lower. Although the shipper doesn’t need to do anything to take advantage of this cost savings it is good to be aware of so that you can maximize the benefit when making decisions concerning how much to ship. This can come into play when ordering products to be shipped to your own warehouse. 

To receive assistance in taking best advantage of this practice along with other potential cost savings benefits contact your American Group representative or call 866-553-6608.