For many organizations, freight shipping rates matter greatly. The cheaper your freight shipping rates are, the cheaper you can move cargo and products from place to place, and the better your bottom line will look at the end of the fiscal quarter.
If you ever use LTL shipping, you need to know how to predict your freight quote and determine ways to reduce your freight quote when you need to cut costs in your freight shipment. Read on for more information about key factors determining your freight shipping quotes.
What Is LTL Shipping?
LTL or less than truckload shipping involves transporting freight that doesn’t take up all of the cubic feet in a standard trailer compartment. It is usually used to transport freight weighing between 150 pounds and 15,000 pounds.
By transporting cargo with LTL shipping, shippers only pay for as much space in the trailer as their cargo or pallets occupy. Therefore, they don’t have to pay the full truckload rate to move cargo from the starting point to the final destination. Through consolidated shipping practices, other shippers and their associated shipments take up any unoccupied space.
LTL services are beneficial for various reasons and are one of the most popular means to transport freight for small businesses. However, even though it is generally more affordable than full truckload shipping or FTL shipping, rates for LTL truckloads can vary heavily based on several significant factors.
What Determines LTL Rates?
Many potential factors can determine LTL shipping rates. Let’s look at three of the most important factors in detail.
Shipping Distance
For starters, shipping distance will impact how much you’ll pay for LTL freight cargo transportation. In general, longer shipping distances mean you have to pay a higher price per hundredweight, which is the standard shipping unit for this industry.
This makes sense intuitively. If a cargo carrier has to drive further, expending more fuel and time, you’ll have to pay more for that service, even with LTL shipping.
Furthermore, some LTL carriers only provide service to certain ZIP codes. If your cargo destination is outside a carrier’s service zone, you might need to transfer your LTL shipment to another carrier. This increases the time and fuel costs, raising your rates across the board.
But note that raw distance doesn't always equate to a higher shipping rate. Ease of transportation can also impact the cost you'll pay. For instance, if an LTL shipping company has to deliver your cargo through crowded, slow-going streets for 20 miles, you might pay more for that than if the company had to deliver your cargo 30 miles in a straight line on the freeway.
Freight Density
Freight density can also impact LTL rates for your company. Density is the space that a shipment occupies in relation to the weight of the shipment. For instance, if you have very light cargo that takes up a lot of space, it might cost more money even though it weighs less than a heavy, very dense object or cargo shipment.
In the LTL shipping industry, there are 18 freight classes that your cargo may be categorized into. These are numbered from 50 to 500, impacting stowability, total weight, ease of loading, and other aspects of freight costs.
The higher your cargo's density, the lower the freight classification rating it receives. The reverse is true for less dense products and cargo shipments, which applies to tariffs or taxes and LTL freight rates.
Why is less dense freight more expensive? Because it prevents shipping carriers from taking on additional loads and making extra money. Due to this fact, they make up some of the lost costs by charging you more for your lower-density shipments.
Accessorials
Lastly, accessorial charges include any extra services your carrier might provide beyond picking up cargo and delivering it to its destination. These include but are not limited to residential pickup and delivery, lift gate service, inside delivery, and delivery to limited access locations.
Put simply, if you require your carrier to do extra work, you can expect to pay more for the labor and time required. The most common accessorial charge is a fuel surcharge; it's usually included in every LTL shipment.
Therefore, if a carrier quotes you a specific LTL freight shipping price, remember that it will likely be a little higher than the quoted cost when you consider fuel surcharges.
In addition to these factors, other things can impact your LTL shipping costs, including:
- Weight. Heavier LTL shipments mean you pay less overall following the hundredweight pricing model
- Base rates. Every LTL carrier has a base rate to ensure that it makes a profit for transporting this kind of cargo
- Minimums or absolute minimum charges/AMC. These are the lowest costs below which a carrier will not decrease its price
- Any negotiated discounts, like special deals or arrangements between businesses and specific freight carriers
What Are the Benefits of Using LTL?
There are many benefits to using this type of shipping service, particularly if you are a small business and don't have enough cargo to move to warrant a full truckload's worth of space.
For starters, LTL shipping is usually cheaper compared to FTL shipping. This is true regarding the raw cost of shipping goods from place to place and warehouse costs.
Because you can send more shipments around through LTL shipping arrangements, you don't need to stockpile as many of your products or resources at a single location at once, reducing your warehousing requirements regardless of the type of freight.
In addition, LTL shipping is often considered safer and more secure than other transportation methods. Since LTL truckloads fill in all available space with multiple shipments, there’s less likelihood that your cargo will move or jostle around, sustaining damage while in transit.
On top of that, LTL shipping allows for increased operational flexibility. You can move your cargo from place to place promptly without waiting for a full truckload of space to become available. Instead, your cargo can be added to an LTL carrier’s truck whenever there’s available space.
More broadly, LTL shipping can reduce the environmental impact your company is responsible for. Through LTL shipping, your cargo requires less fuel than FTL shipping, so you can inform your clients and customers that you are doing everything possible to go eco-friendly or "green."
Of course, LTL shipping often comes with shipment tracking services and procedures. Even if your shipment is mixed in with shipments from other clients or businesses, you’ll be able to track your cargo’s progress across the state or country to ensure it arrives on time and budget.
Shipping With RPM
As you can see, several major factors can impact your LTL shipping rates. Among those, shipping distance, freight density, and accessorial charges are the most important, meaning that these areas are the most logical places to make cuts if you need to reduce costs.
However, you can also contract with a knowledgeable end-to-end transportation provider like RPM. At RPM, we strive to provide you with the best LTL shipping rates and quotes and comprehensive service and shipment tracking from start to finish.
Contact us today to learn more about how we can help your business with all of its cargo transportation needs.
Sources:
LTL Freight Quotes, Packing, Tracking and Shipping | FedEx
Less-Than-Truckload (LTL) Definition | Investopedia
What Is CWT (Hundredweight) and How Do You Calculate It? | Investopedia
