If you’re a small- to medium-sized shipper, you likely rely on less-than-truckload (LTL) shipping to transport your products. While this shipping method costs more, it allows you to ship goods without paying for an entire trailer.
Because LTL shipping rates are higher than other methods, understanding how they’re calculated and what fees are involved is essential for negotiating better prices. In this guide, learn more about LTL shipping rates, what factors affect them and ways to reduce costs.
What is less-than-truckload shipping (LTL)?
LTL shipping is a method of transporting a relatively small amount of freight that only requires using part of a truck or trailer. Instead, LTL shipments are consolidated with other loads from other companies to create a full truckload.
LTL shipping is commonly used by businesses that don’t have enough goods to fill an entire truck but need to ship their products. Full-truckload (FTL) shipping is used when the size of a shipment warrants the use of an entire truck, such as for large, bulky or heavy loads.
Factors affecting LTL shipping rates
Several factors can affect the cost of LTL shipping, including shipment size, destination, freight class and additional fees.
Weight and size of the shipment
The size and weight of a shipment significantly impact its shipping rate. Most LTL carriers consider weight as one of the most significant factors in determining rates. Heavier cargo will cost the carrier in fuel, equipment and handling. Therefore, they must charge shippers more to cover their costs.
A shipment’s size also impacts LTL rates. Larger shipments take up more space in the trailer, leading to higher costs. As a result, some LTL carriers impose a minimum charge for shipments that take up less space than their weight would warrant. This helps them make up for the difference they could have made from shipping denser items.
Distance between origin and destination
Another vital factor in calculating LTL rates is the distance the shipment needs to travel. The longer the distance between the point of origin and destination, the higher the cost. This is because carriers incur more fuel, labor and equipment overhead costs to transport the shipment. In most cases, LTL pricing structures include base rates for shipments within a certain distance, with a per-mile rate for any distance traveled beyond their base radius.
Freight class and density of the shipment
The National Freight Traffic Association (NMFTA) has established a classification system that standardizes prices of LTL shipments based on density, stowability, handling and liability. Every commodity is assigned a class from 50 to 500, with a lower number correlating to higher density, stowability and handling ease. The higher the freight class, the higher the cost for LTL shipping, so it is essential to classify the shipment accurately.
A shipment’s density is its weight-to-volume ratio, which is calculated by dividing the weight of the shipment by its volume in cubic feet. Higher-density shipments take up less space but weigh more, and lower-density shipments take up more space but weigh less. The higher the density, the lower the LTL rates since these shipments are easier to handle and harder to damage.
Accessorial charges and fees
Accessorial charges are fees that carriers charge for services beyond standard pick-up and delivery. These services include liftgate service, inside delivery, residential delivery and appointment delivery. These extra service charges can significantly increase LTL rates, so it’s important to specify the need for these services when collecting freight quotes.
LTL carriers may also charge additional fees for various reasons, such as reweighing the shipment, correcting an address or changing the delivery date. Different types of LTL freight are more susceptible to these fees than others, so read carriers’ terms and conditions thoroughly.
Linehaul charges
Linehaul charges represent the main cost of transporting a shipment between the origin and destination terminals. These charges include the base rate for transporting shipments up to a certain distance and the per-mile rate, which is the cost for every mile traveled beyond that distance. Linehaul charges are based on shipments’ weights and dimensions, the distance between terminals and fuel costs.
Fuel surcharges
Fuel surcharges are an additional fee that LTL carriers may charge to account for fluctuating fuel costs. These charges are calculated as a percentage of the linehaul charge and can vary based on the fuel prices in a particular region. LTL carriers use a fuel charge index, like the Energy Information Administration’s Diesel Fuel Price Index, to determine the surcharge percentage.
How LTL carriers calculate rates
LTL carriers primarily use the NMFTA freight class and shipment density to calculate freight quotes.
- The carrier uses the shipment’s NMFTA class to establish a baseline rate for the shipment.
- It calculates the shipment weight per 100 pounds, also known as CWT.
- The shipment’s total volume is calculated by multiplying the pallet’s length, width and height..
- The LTL carrier divides shipment weights per 100 pounds by its total volume to calculate density.
Since carriers generate freight quotes based on the trailer space a shipment requires, density is a great way to determine the final shipping cost.
Ways to reduce LTL shipping costs
Shippers can use several strategies to reduce LTL shipping costs, including consolidating shipments, checking their packaging and negotiating with carriers.
Consolidating multiple shipments
An effective way to reduce LTL shipping costs is to consolidate multiple shipments into one shipment. With a larger LTL shipment, companies benefit from lower linehaul charges and reduced accessorial fees since there are fewer shipments to handle. Shippers also boost their bargaining power with larger shipments to negotiate better freight rates and can save on their administration fees.
Packaging and labeling accurately
It’s important to package and label shipments correctly for many reasons, including reducing shipping costs. With correct packaging and labeling, shippers can optimize shipment size, avoid additional carriers’ charges and track LTL shipments. This attention to detail can also reduce the risk of damage or delays, and boost efficiency while minimizing cost.
Choosing the right freight class
Choosing the correct freight class for LTL shipments is essential for reducing LTL shipping costs. With adequate preparation and knowledge regarding their particular shipment, companies can evaluate liabilities or special handling requirements ahead of time for accurate freight quotes. Taking precise measurements of LTL shipments optimizes shipping costs.
Negotiating rates with carriers
Negotiating rates can be an effective way to bring down LTL shipping costs. Shippers can take a few steps to negotiate with carriers effectively:
- Gather information about your shipping volume frequency and requirements before negotiating with carriers to demonstrate the value of your business.
- Shop around and compare rates with multiple carriers to find the most competitive pricing and establish a knowledge of market rates to use as leverage.
- Building relationships with carriers based on loyalty, respect and trust can lead to more favorable pricing.
- Be flexible with your shipping requirements, such as pick-up and delivery times. Carriers that can optimize their operations and reduce costs can offer lower rates.
- Consider a long-term contract with a shipper you trust. Carriers often provide better rates in exchange for a mutually beneficial partnership.
Ship more efficiently with the best LTL shipping rates
With a better understanding of LTL rates, you can ensure that you’re getting fair freight quotes from carriers to transport your small- to medium-sized shipments. Better yet, through shipment optimization and building positive relationships with LTL carriers, you can negotiate better rates to save your company on shipping costs.
FAQ
LTL shipping rates are around $50 per hundred pounds for shipments between 0-499 pounds, $40 per hundred for 500-999 pounds, and less for larger shipments.
LTL shipping rates are higher than FTL rates since shipments require more handling. There is also a need for more LTL drivers, further increasing prices.
Shippers can reduce LTL shipping costs by consolidating shipments, avoiding accessorial charges and packing their shipments properly.
Sign up for a FreightWaves e-newsletter to stay informed of all news and trends impacting supply chain careers and operations.
