Breaking down LTL freight rates
Whether you’re new to Less-than-truckload shipping (LTL) or are looking to see if LTL might offer some cost savings for freight you typically ship truckload, you’ll quickly see that many factors influence the price you’ll pay. And the rate will depend on whether you have published pricing or are receiving a spot quote.
Understanding what goes into LTL freight costs can give you the insight you need to fully comprehend your supply chain and make it easier to work with providers.
Factors that go into LTL shipping rates
Much like pricing for FTL, LTL rates fluctuate. These changes depend on several factors, including:
Freight class plays a pivotal role in most LTL shipping rates. Assigned by the National Motor Freight Traffic Association (NMFTA), your shipment’s freight class will be between 50 and 500 — a number that reflects density, ease of handling, liability, and stowability. In general, the lower the class, the lower the freight charges. Learn more about freight class.
The weight of your shipment is an important factor in determining your LTL rates. Not only does weight play a role in determining freight class, but it also decides how the shipment is handled during loading and unloading. Typically, higher weights lead to higher charges. However, the charge per pound will typically decrease as a shipment’s weight increases.
The size of a shipment, including length, width and height, will affect the quoted price. The space that a shipment takes up on a trailer is a significant factor. Generally, the more space a shipment takes up, the higher the freight charges. Shipments with one dimension longer than 8 feet also can trigger additional charges, such as an over-dimensional freight charge. Dimensions are also how you find the cubic footage of your load, which may play a role in pricing.
Carriers try to maximize the utilization of their trailers, so shipments that are square and palletized tend to experience lower prices. On the other hand, shipments with odd dimensions, not palletized, or otherwise difficult to load into a trailer will typically be subject to higher prices.
Freight that is well packaged is easier to handle and less likely to be damaged and will generally have lower prices than other shipments.
Both the distance your shipment will be traveling and the lane it travels on are important factors for LTL freight charges. As you would expect, freight charges generally increase as the distance traveled increases. But some lanes are cheaper than others, even with the same distance. The demand in and out of each market can influence the balance of freight moving within an LTL network. This will impact the price as a more balanced lane will help maximize the utilization of each trailer.
Accessorial charges are fees for additional services and requirements. Some examples include residential delivery, liftgate service, and inside delivery.
Carriers may apply a fuel surcharge that fluctuates based on the current price of fuel. The fuel surcharge for LTL is typically based on a percentage of the linehaul, not a dollar amount per mile.
LTL pricing will be influenced by market demand, capacity and seasonality. During peak shipping seasons or times of increased demand, rates may be higher. However, market conditions will not affect your LTL pricing on a day-to-day basis if you have previously negotiated rates or published pricing in place.
Service level required
If your load is being shipped standard LTL, Volume LTL or a time-critical service, this will play a factor in your LTL shipping rates. Different carriers have varying pricing structures and service options available. Volume LTL rates are often your most cost-efficient option for large LTL shipments that take up at least half a trailer of space, while expedited services may cost more.
Spot pricing vs. base rates + discounts
To understand how those individual factors will affect your LTL prices, you should consider the type of quote you’re getting. LTL carriers offer base (or published) rates, which are often subject to negotiation. If you’re on a pricing program that uses base rates, there will be specific negotiated pricing for things like the lane the freight is shipping in and certain discounts for things like efficient loading. Discounts will be published in your tariff along with other pricing provisions, including base rates and accessorials.
You may choose to use spot pricing over a negotiated base rate, which can get you instant access to pricing without having to negotiate a published price. Pricing will fluctuate depending on these market conditions, as opposed to base rates which will remain consistent.
Learn more about spot vs contract rates in shipping
Tips for getting the best LTL rate
While some pricing factors are outside of your control, there are still things you can do to ensure you’re making cost-effective decisions:
Consider more than the upfront price
When you’re comparing prices from service providers, it’s important to remember that choosing an LTL provider based solely on freight charges may not always be the best choice. Issues such as damaged freight and missed pick-ups or drop-offs can lead to higher total costs, so it is vital that the LTL carrier you work with is experienced, reliable and connected.
Use proper packaging
Proper packaging that protects your freight during the rigors of travel will help to reduce the chances that your freight is damaged and will often allow you to secure better pricing. Learn more about packaging LTL freight.
Provide accurate details
Make sure you’re classifying your freight under the correct NMFC and that the weight and dimensions are accurate. This will ensure that you won’t get charged additional fees and will enable you to know the full cost of your LTL transportation accurately and upfront when analyzing price.
Review your carrier’s past performance
Analyzing carrier performance is another important way to maintain and streamline LTL shipping costs. By tracking things like on-time pick-ups and deliveries for the carriers you use, you’ll be able to get a more accurate look at how much you’re spending and ensure you’re using the best carriers for your shipments.
Ship LTL with ArcBest
Shipping with dynamic pricing or base rates? ArcBest is here to help. Through our LTL solution, ArcBest can provide you with options that best suit your business. With 100 years of experience in LTL, our extensive industry knowledge will keep your freight moving.