Not all LTL shipments are created equal. The better you prepare your shipment and yourself, the better chance you’ll receive the top savings and service on your LTL shipment. Be careful to not get left in the dark.
Less-than-truckload (LTL) is a way to ship smaller shipments that are too large to be sent as a parcel and too small to fill an entire truckload. LTL carriers combine shipments from multiple shippers, consolidate that collected freight, and deliver to terminals where the shipments are re-sorted and re-consolidated for additional line-hauls.
The many LTL options available enable shippers to gain more flexibility, control, and visibility into their freight costs and management. Unlike truckload that has a fairly simple formula — per-mile rate or price per-hundred rate plus fuel, there are several factors that determine LTL rates. These factors impact the overall cost of your shipment and the overall cost of your product.
These are 10 of the most important factors that create LTL freight costs.
- Weight Group: LTL shipments usually weigh between 151 to a hefty 20,000 pounds. As the freight increases in weight, LTL carriers typically apply discounts on the shipment. As the freight weight nears the lowest weight in the next heaviest weight group, it will be rated at the lowest weight of that group. The more a shipment weighs, the less it costs per hundred pounds.
- Base Rates: Each LTL carrier determines their own base rates or CWT. The CWT is calculated based on freight classification and quoted per 100 pounds. Depending on their need for volume, carriers may increase or decrease their base rates accordingly.
- Freight Class: Classes of Freight are published in the National Motor Freight Classification (NFMC) book by National Motor Traffic Association (NMFTA). Classification rates are a major factor in determining the overall LTL rate. There are currently 18 different classes ranging from 50 to 500. The class is determined by density, value, stow-ability, handling, and liability. Freight that is dense and difficult to damage is usually easier to handle and will be given a lower class. The higher classes are for less dense freight that takes up more space and is more challenging to handle. The higher the class, the higher the rate.
- Density: In order to know the freight class, shippers must determine the density. To calculate density, take the total weight of the shipment and divide by total cubic feet. If the shipment is on a palate, use the dimensions of the pallet, combined height of the carton and pallet, plus total weight of the shipment. Always be sure to measure the longest sides including any protrusions or overhang to determine the correct density.
- Distance: Several LTL carriers only operate in certain zip codes or regions. It is important to determine if a shipment goes beyond a shipper’s normal service area, as the shipment will need to be transferred to another truck for delivery. This practice called interlining can result in higher costs. In general, the longer the distance, the higher the price will be.
- FAK: This tricky acronym stands for Freight of All Kinds. This is an arrangement that enables multiple products with different classes to be shipped and billed as the same freight class. A client may ship products ranging from 50 to 100 in rate class. They could negotiate an FAK with the carrier so all items were sent at a class 70. If a shipper knows how to negotiate FAK, they can save big time.
- Minimums: Beware of the absolute minimum charge (AMC). This charge is the minimum charge required for carriers to move the shipment. Many carriers are increasing this hidden rate factor. Carriers are often requesting a 2-3% increases in contract rates and $5 increase in minimum charges. If the minimum charge is $50, a $5 increase is a 10% increase.
- Negotiated rate tariffs: It is possible to negotiate with LTL carriers based on your lanes. If you understand freight rates and activity for those lanes, you can negotiate with LTL carriers to determine different rate tariffs for different lanes.
- Negotiated discounts: Utilizing a 3PL enables shippers to save an extra 18-25% off an already discounted rate. How? Third party logistics provides are professionals, so they already understand how to negotiate and find the best possible rate. Then, they add extra savings by combining shipments and working with multiple carriers. 3PLs can use their relationships and expertise to negotiate additional discounts.
- Accessorials: The final hidden factor is accessorials. These are charges that can be added for extra services that are seen as beyond a typical pickup or delivery. Accessorial fees can be charged for lift gates, residential pickup, limited access locations like jails or schools, and inside delivery. An expert like Vestra Logistics can waive all these extra hidden fees.
There is a solution to uncovering these hidden rate factors and finding the best possible rate and service for your LTL shipments.
It’s no secret that Vestra Logistics has top expertise in LTL shipment rates. We use our expertise to help you determine your shipments’ weight, class, density, and distance paired with the lowest negotiated base rates, FAK, minimums, tariffs and discounts. Then we include zero markups on the accessorial charges.
We use your volume and shipments combined with other client’s volume and shipments to further negotiate rates and discounts. It’s truly a winning combination.
If you are looking for a major reduction in price your LTL freight shipments, contact Vestra today so we can share everything, including the real margins.