How are LTL freight rates calculated?
Many factors affect LTL rates. Generally, less than truckload rates are calculated differently than truckload rates. Before you make a shipment, it is important to understand what determines shipping rates. So, knowing the factors that affect and form LTL freight rates can help you reduce shipping costs and can allow you to ship more efficiently.
Which factors determine LTL rates?
Normally, full truckload shipping rates are based on a per-mile rate or price-per-hundred weight plus a fuel charge. However, less-than-truckload (LTL) rates are more complex, and there are many factors that you need to consider that could affect the cost of your LTL shipment. So, below are some of the main factors that can affect an LTL shipment.
The more your shipment weighs, the less you pay per hundred pounds. Carriers often refer to a chart that lists the cost-per-hundred (CWT) weight and breaks it down into certain weight breaks. Also, if the weight of your shipment increases, it moves into the next highest weight category that has the lower rate per hundred pounds.
Freight classifications are split into 18 categories that make up the National Motor Freight Classification (NMFC) system. Additionally, the categories of classifications range from Class 50 (the cheapest) to Class 500 (the most expensive). Classes depend on the density, storability (items of an irregular shape cost more), handling, and liability.
The denser the product you are shipping is, the lower the rate will be. Density is the weight per cubic foot of a shipment. If you pack your items efficiently, you can reduce the overall size of your package which can help reduce the overall shipping cost of your shipment.
The farther your shipment is traveling, the higher the rate or price-per-hundred weight you’ll pay. Interlining is often used when a shipment is going to a location outside of the carrier’s region of service, which can result in higher shipping costs.
The base rate of your shipment depends on the weight, distance, and destination of your shipment. Then, carriers will adjust this rate to maximize truckload volumes or to balance trucks and freight on certain routes or lanes.
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