How to Calculate LTL Freight Rates

There are numerous factors that you need to keep in mind while calculating LTL freight rates for your business. The deeper you understand about what is included in the rate, the more you’ll be able to manage freight and freight shipping processes to save money on resources and transportation costs in the long term.

The many factors that impact the freight rates will give you many options while making LTL shipping an appealing method of transportation for shippers.

Factors to Consider When Calculating LTL Freight Rates

The weight of LTL shipments generally lies anywhere between 151 and 20,000 lbs, and LTL carriers can provide discounts as the weight increases, discount offers depends on the weight class of the LTL carrier.
LTL freights include many different key factors that can impact the final cost of shipment in a number of ways, unlike truckload rates which are easy to determine on the basis of per-mile or price per-hundred weight and fuel charge. LTL carriers collect freight from multiple shippers and combine that freight onto LTL trailers for line-haul to a hub or delivering terminals, where the freight will undergo more sorting and integration.

The factors that impact LTL freight rates are as follows:

1. Weight

One of the major factors in LTL freight rates is the weight of the shipment. Freight Carriers will normally charge less per-hundred pounds as the weight increases. The more the weight of the shipment, the higher the price.

2. Freight Classification

Each type of freight has a specific classification, which plays a big role in deciding freight rates. You can read about the various classes in the National Motor Traffic Association’s National Motor Freight Classification (NMFC) book. Factors that define a class of freight include value, stow-ability, liability, product density, and handling.

3. Density

Another important factor to take into account is density, which not only determines freight classification, but also the freight rate itself. Freight density can find out by dividing the total weight by the total cubic feet. Palletized freight will include the weight and cubic feet of the pallet, along with the combined height of the pallet and carton.

4. Base Rates

All LTL shippers determine their own basic base fare, which is quoted per-hundred pounds (CWT). CWT is based on freight classification, and carriers will modify base rates based on their volume needs.

5. Distance

Normally, the longer the transportation distance, the more the cost you have to pay. Many LTL shippers only provide services in a specific region, so you should understand the areas that your carrier usually targets. If the delivery area falls outside of the carrier’s normal service area, the trucking company will have to carry out the interlining process, which involves transferring shipments to other LTL carriers. Interlining can incur higher costs.

6. Negotiated Rate Tariffs

Companies can negotiate rate tariffs with LTL carriers instead of settling for a base rate. If you have a proper understanding of your freight data and lane activity, you can get the best deal possible on your LTL freight and can work with carriers to negotiate various lane and tariffs.

7. Freight All Kinds

Consolidated shipments are generally classified as FAK (freight all kinds). It is a term used for tariff classification for different kinds of goods that are combined and shipped together at one freight rate.

8. Accessorial Charges and Surcharges

Accessorial charges are the additional charges which come from extra services that the carrier. Examples of these charges include lift gate service, limited access locations such as storage units or schools, inside deliver of shipment, and residential pickup or delivery.

The Bottom Line

All of these factors will affect your final LTL freight rates up to a great extent, and missing any of these specifics can result in a 25-40% increase in expenses. However, acknowledging and understanding each of these aspects can help ensure you save as much as possible.

If you would like to get started on shipping today and get the best freight rates, get an instant rate quote at Tenaxx Logistics today.