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LTL and Its Rate-Determining Factors

Jan 01, 2018

There are many ways to move freight shipments from point A to point B, such as air, rail, water, and truck. When using trucks, there are a variety of options. One of the most popular ones is less-than-truckload (LTL). LTL shipping is the movement of goods, from many different customers, on one truck. Unfortunately, determining LTL shipping rates is often confusing, because there are so many factors involved. Below is a listing of the top factors, with information to make it easier to understand how your LTL freight rates are being calculated.

LTL rates-man at computer with calculator.jpgWeight: When preparing information for a freight quote, you’ll want to start with the weight of your shipment. The more that your LTL shipment weighs, the lower the cost per pound. This is because rates are measured in hundredweight, also known as CWT (Centum Weight), which decreases as weights increase.

Density: To ensure that your freight quote is accurate, it is necessary to classify your freight. To do so you must calculate the density of your shipment, or weight per cubic inch. Start by measuring its height, width, and depth in inches. Multiply these numbers together and then divide by the total weight of your shipment. The result is the density of your shipment.

(H x W x D) ÷ Total Weight = Shipment Density

Freight Class: Freight classification is a key factor when calculating less-than-truckload costs. They are published in the National Motor Freight Classification (NMFC) book by National Motor Freight Traffic Association (NMFTA). There are 18 different classes determined by characteristics of your shipment, including density, value, stow-ability, handling requirements (durable versus fragile, for example), and liability.

Distance: Although it may not be surprising that the further a shipment is transported, the more the shipping rates will be, it is not quite that simple. There will often be multiple carriers involved in long-distance shipments, depending on the starting point and destination. Not only that, fuel costs, driver costs, and equipment costs all increase as distance increases.

Base Rates: Although LTL rates are determined on a case-by-case basis due to all the factors involved, most carriers have pre-established base CWT rates. These rates vary from carrier to carrier and from lane to lane. These tend to fluctuate depending on a carrier’s demand at any given time. 

Freight All Kinds: Also known as FAK, it allows multiple products with different classes to be shipped and billed at the same freight class. 

Minimums: This is the cost below which a carrier will not go. It is also called the absolute minimum charge (AMC) for this reason. This ensures that the costs incurred to transport a shipment by a carrier will be covered.

Negotiated Discounts: These discounts may be in an agreement that you negotiate directly with a carrier, if you are a large shipper, or they may be those secured by your 3PL. Regardless, who doesn’t like to save money? 

Additional Services Fees: These are any additional fees for extra services that aren’t typically included in the base freight rates. They include lift gate service, inside delivery, palletizing, and shrink wrapping, for example, as well as fuel surcharges. Obviously, the more of these add-on services, the higher your shipping rates will be. 

Hopefully this review of the factors involved in the calculation of your LTL freight shipping rates has been helpful. For additional assistance, or to request a freight quote, call American Group by phone at 866-553-6608 or by email at Info@ShipAG.com. We’re here to make Shipping.Simplified®.