Learn how LTL freight rates are determined

Transcript

How Freight Shipping Rates Are Formulated

Less-than-truckload shipping involves transporting multiple small to medium-sized shipments together on a single trailer. Carriers pick up cargo from a variety of different shippers, consolidate them together at transportation hubs, and ship them on trucks to their destination regions, where they are re-organized for delivery to various locations. LTL shipping is an economical option for shippers that need to move loads that will not fill up a standard full truckload. However, due to the complexity and logistics required to combine a wide range of different sized commodities all heading to different destinations, LTL pricing depends on a lot of factors and can get confusing. Today, we will be sifting through the confusion to examine how LTL freight shipping rates are formulated. Though the details may differ between carriers, these are the most common factors that determine the shipping rate for an LTL shipment.

 

Weight, Dimensions, and Freight Class

A shipment’s size, weight, and dimensions are usually the first information you must provide when obtaining an LTL freight quote. Because multiple different-sized shipments need to fit into a finite amount of space on an LTL trailer, these characteristics must be accurately represented at the time of the quote. Typically, the more space and weight your shipment takes up, the more you will have to pay. When weighing and measuring your cargo, be sure and include any packaging involved and measure from the widest and tallest points of the shipment.

The freight class of a shipment also affects the cost to ship. The NMFC classifies commodities based on their transportability, which includes factors such as density, handling, stowability, and liability. There are 18 possible NMFC classifications for LTL freight, the lowest and least expensive being 50, and the highest and most expensive being 500. Freight that is dense, durable, and has less liability will be classified lower, while freight that is fragile, uniquely shaped, or prone to damage, loss, or theft will be classified higher. As a general rule, the denser an item, the lower its freight classification code.

 

Origin and Destination

The further your freight needs to go, the more expensive it will be, due to higher fuel costs, more stops at transit hubs along the way, and more person-hours put into transporting the shipment. However, the origin and destination locations may also affect the rate. Freight moving along standard routes to metropolitan areas will typically cost less than cargo picked up from or delivered to more remote locations that are further out of the way.

 

Fuel Costs

Fuel costs, like distance, are always a factor in determining freight rates. This surcharge can fluctuate depending on the going price of fuel, but it will inevitably be a part of your LTL freight quote.

 

Accessorial Charges

Accessorial charges are additional services required to transport a shipment outside the standard dock-to-dock LTL service offered by a carrier. They can include a variety of things, including:

  • Lift gate service
  • Residential pickup or delivery
  • Remote or limited access locations
  • Inside delivery
  • Special delivery times

Accessorials and their associated charges vary from carrier to carrier, so including them when submitting your information for an initial quote will help you find the best deal. In addition, many carriers are willing to negotiate accessorial rates for repeat customers. If you always require a certain accessorial for a consistent shipment, you may be able to obtain a discount on the regular accessorial fee.

 

Minimum Charge

Minimum charges are the lowest price a carrier will offer, no matter the circumstances. The minimum charge ensures that carriers cover all their fixed costs and overhead for a specific shipment or route. Ask your carrier about their minimum rate, particularly if you are shipping smaller loads across shorter distances, as they may differ between LTL freight companies.

 

Negotiated Rates

Every LTL carrier establishes its own base rates, but almost all of them are willing to negotiate discounts. Base rates are typically quoted per 100 pounds but can vary by company or freight lane. Carriers may change their base rate depending on current demand or their need to fill capacity for certain routes. It can be challenging to accurately compare LTL shipping rates just by looking at base prices or discounts because they’re almost always different from carrier to carrier. For instance, a smaller discount on a lower base rate may be a better overall deal than a higher discount on a higher base rate, so it’s important to do thorough research on potential carriers before you ship.

 

Get Help From Koho

One way to avoid getting lost in the confusing world of LTL shipping rates is to partner with freight experts that can help you make the right decisions. The LTL professionals at Koho can help you secure the best rates and discounts with the most trusted carriers, all through their powerful and intuitive online shipping platform. LTL is complicated, but it doesn’t have to be. Book your next LTL shipment through Koho today and start shipping with confidence.

Image of trucks lined up in a parking lot

How Freight Shipping Rates Are Formulated

Less-than-truckload shipping involves transporting multiple small to medium-sized shipments together on a single trailer. Carriers pick up cargo from a variety of different shippers, consolidate them together at transportation hubs, and ship them on trucks to their destination regions, where they are re-organized for delivery to various locations. LTL shipping is an economical option for shippers that need to move loads that will not fill up a standard full truckload. However, due to the complexity and logistics required to combine a wide range of different sized commodities all heading to different destinations, LTL pricing depends on a lot of factors and can get confusing. Today, we will be sifting through the confusion to examine how LTL freight shipping rates are formulated. Though the details may differ between carriers, these are the most common factors that determine the shipping rate for an LTL shipment.

 

Weight, Dimensions, and Freight Class

A shipment’s size, weight, and dimensions are usually the first information you must provide when obtaining an LTL freight quote. Because multiple different-sized shipments need to fit into a finite amount of space on an LTL trailer, these characteristics must be accurately represented at the time of the quote. Typically, the more space and weight your shipment takes up, the more you will have to pay. When weighing and measuring your cargo, be sure and include any packaging involved and measure from the widest and tallest points of the shipment.

The freight class of a shipment also affects the cost to ship. The NMFC classifies commodities based on their transportability, which includes factors such as density, handling, stowability, and liability. There are 18 possible NMFC classifications for LTL freight, the lowest and least expensive being 50, and the highest and most expensive being 500. Freight that is dense, durable, and has less liability will be classified lower, while freight that is fragile, uniquely shaped, or prone to damage, loss, or theft will be classified higher. As a general rule, the denser an item, the lower its freight classification code.

 

Origin and Destination

The further your freight needs to go, the more expensive it will be, due to higher fuel costs, more stops at transit hubs along the way, and more person-hours put into transporting the shipment. However, the origin and destination locations may also affect the rate. Freight moving along standard routes to metropolitan areas will typically cost less than cargo picked up from or delivered to more remote locations that are further out of the way.

 

Fuel Costs

Fuel costs, like distance, are always a factor in determining freight rates. This surcharge can fluctuate depending on the going price of fuel, but it will inevitably be a part of your LTL freight quote.

 

Accessorial Charges

Accessorial charges are additional services required to transport a shipment outside the standard dock-to-dock LTL service offered by a carrier. They can include a variety of things, including:

  • Lift gate service
  • Residential pickup or delivery
  • Remote or limited access locations
  • Inside delivery
  • Special delivery times

Accessorials and their associated charges vary from carrier to carrier, so including them when submitting your information for an initial quote will help you find the best deal. In addition, many carriers are willing to negotiate accessorial rates for repeat customers. If you always require a certain accessorial for a consistent shipment, you may be able to obtain a discount on the regular accessorial fee.

 

Minimum Charge

Minimum charges are the lowest price a carrier will offer, no matter the circumstances. The minimum charge ensures that carriers cover all their fixed costs and overhead for a specific shipment or route. Ask your carrier about their minimum rate, particularly if you are shipping smaller loads across shorter distances, as they may differ between LTL freight companies.

 

Negotiated Rates

Every LTL carrier establishes its own base rates, but almost all of them are willing to negotiate discounts. Base rates are typically quoted per 100 pounds but can vary by company or freight lane. Carriers may change their base rate depending on current demand or their need to fill capacity for certain routes. It can be challenging to accurately compare LTL shipping rates just by looking at base prices or discounts because they’re almost always different from carrier to carrier. For instance, a smaller discount on a lower base rate may be a better overall deal than a higher discount on a higher base rate, so it’s important to do thorough research on potential carriers before you ship.

 

Get Help From Koho

One way to avoid getting lost in the confusing world of LTL shipping rates is to partner with freight experts that can help you make the right decisions. The LTL professionals at Koho can help you secure the best rates and discounts with the most trusted carriers, all through their powerful and intuitive online shipping platform. LTL is complicated, but it doesn’t have to be. Book your next LTL shipment through Koho today and start shipping with confidence.

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