Unless you own a major corporation, your business is probably using less-than-load (LTL) shipping. But if you're new to shipping lingo, it can be difficult to decipher what, exactly, you're paying for. Keep reading for a breakdown of how LTL shippers calculate rates.
Understanding Freight Rates
Several factors go into determining the cost of your LTL shipment. These include weight, density, freight class, travel distance, base rate, and additional fees. Let's take a closer look at each.
As you may expect, this calculation is based on how much your entire shipment weighs. These rates are broken into ranges, and you typically pay less per pound as total weight increases until you reach the next weight group threshold.
Density is the amount of space an object takes up relative to it's size. For example, a light and airy ping-pong ball has a much lower density than a heavy ball bearing. You can determine the density of your shipment by dividing its total cubic feet by its weight. When you calculate cubic feet, include all overhangs - such as pallets.
Set up by the National Motor Freight Association (NMFTA), freight classes help standardize shipping rates among different companies. There are 18 different classes, which are based on shipment density, value, ease of loading and stowing, and liability. Classifications range from 50 to 500, and the lower your class number, the cheaper it is to ship.
This is literally how far you intend to send a shipment. The further it needs to go, the higher the cost. Many carriers only deliver to a set area, and any deliveries outside that area require interlining or switching shipping companies midway through shipment. This will increase how much you pay.
This is the minimum fee you need to pay to use a shipping company. This rate typically varies by company and freight class - and is subject to change. Companies often modify base rates in relation to overall volume, so shipping during off-peak times can save you money.
Fees may appear on your freight bill for any optional services that go beyond standard shipping. Every LTL-shipping company has its own pricing structure, but some of the most common fees are charged for delivering to limited-access areas, liftgate deliveries, bringing a shipment inside a building, and delivering to a private residence.
Now that you understand what makes up a freight rate and you know what you're paying for, you can request and decode shipping quotes with confidence!
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