Shipping Less-Than-Truckload (LTL): How Are Rates Determined?

Less-than-truckload shipping, or LTL, is the transportation of relatively small shipments. They are typically under 10,000 pounds, six standard pallet positions or less, and do not require the entire trailer. When shipping LTL, shippers pay for the area on the trailer their shipment occupies. The other occupants of the trailer's space pay for the remainder of the cost.

LTL is a niche service within the transportation industry. There are hundreds of thousands of full truckload carriers but substantially fewer LTL carriers. Additionally, many LTL carriers operate within specific regions. In locations where few LTL carriers exist, it can be a challenge to coordinate service.

Choosing the right third-party logistics partner (3PL) to help can make all the difference. At Armstrong, we move over two hundred thousand loads per year, giving us buying power with LTL carriers, access to an extensive LTL carrier network, and competitive tariff rates.

For those new to LTL shipping, different LTL carriers' tariff rates can be confusing. All LTL carriers set their own tariffs, and they often vary greatly. Specific costs are nearly impossible to predict, as they fluctuate daily based on demand, fuel prices, and the exact parameters of the shipment.

In this article, we will discuss how rates are determined, the benefits of shipping via LTL, the alternatives, and other things to consider.

Factors That Determine LTL Shipping Rates

Several factors go into determining LTL rates. Below is a list of the most important or commonly used ones.

• Freight Classification

By far, this is the most important factor in determining the cost of LTL shipments. Incorrect classification leads to increased cost and additional fees, and you often won't see these added costs for several days. For example, suppose the items require special handling (i.e., liftgate, inside delivery, tradeshow, etc.), and this is not disclosed in advance. In that case, the invoiced rate will be higher than your initial quote.

There are 18 freight classifications ranging from 50 to 500, as established by the National Motor Freight Traffic Association. Class is based on the following: shipment density, value, stowability, handling, and liability.

In most cases, the lower the class, the lower the rate. Dense shipments receive a lower classification because they are harder to damage and easier to handle. Shipments with a higher classification are less dense and take up more space relative to the weight. These loads are more prone to damage and require special handling.

ClassIT is a helpful tool to determine classification. This is a paid service, so check with your organization or sign up online to access this information. Many of our Armstrong agencies can assist with freight classification as well.

• Weight

Many LTL carriers use centum weight (CWT), or hundredweight, to calculate rates. In this case, rates are quoted per 100 pounds. The carrier has a CWT calculation based on freight classification rates, shipment weight, and route distance. In general, the heavier the weight of the shipment, the less the shipper will pay per 100 pounds.

• Dimension

The dimensions and weight of the shipment will allow you to calculate density to help determine the freight class, which directly impacts rates.

Unusually shaped objects such as hockey sticks or gym equipment typically take up more space, thus increasing the shipping cost even if they weigh less than a standard pallet of steel bolts.

Here are a few ways you can minimize shipping and dimensional pricing costs:

Minimize your packaging. Don't use a larger-than-necessary box and fill it with packing peanuts or bubble wrap. Use an appropriately sized box instead.

Organize your pallets to maximize space. Load pallets evenly on top and the sides, creating level rows on the truck.

Train your warehouse and packing/loading staff. Holding your employees to clear and consistent standards will help to reduce overall costs in the long run.

• Distance

In general, the longer the distance, the higher the rate per pallet or hundredweight. The origin zip code and the destination zip code are used to determine the shipment's distance.

Most LTL carriers have multiple terminals in a specific state. If a particular LTL carrier's delivering terminal is located close to the shipment's consignee, these shipments tend to have lower rates than their competitors.

On the other hand, some LTL carriers only service a specific geographical area and therefore have to transload their shipment to a partner carrier to reach the shipment's final destination. This is called "interlining," which typically costs more and exposes loads to a higher risk of loss and damage.

Accessorial Charges to Consider

Anything that is out of the norm or requires extra time or effort will incur an additional fee from an LTL carrier. The best way to prevent this is to know what commodity is being shipped and any other services required at pickup and delivery.

The following are instances that commonly see extra fees after the load has been delivered:

• Extreme length, or any item over 8 feet.
• Nontraditional locations, especially those without a dock (i.e., church or temple, shopping mall, farm, or rural location).
• Liftgates, which are needed when the facility doesn't have a dock (typical for residential deliveries and small businesses). Essentially, a liftgate is a platform attached to the trailer that lowers the pallets from the trailer to the ground.
• Delivery appointments.
• Inside pick up/delivery.
• High-security facilities (i.e., government locations, guard shack, or check-in required).

What You Can Expect with LTL Shipping

When shipping with an LTL carrier, you can expect the following:

• No Direct Contact With the Driver

To confirm pickups have been completed, you'll need to reach out to the dispatcher or your shipper directly. Tracking can often be done on the LTL carrier's website or with the agent who booked your shipment. Delivery confirmation can usually be checked on an LTL carrier's online tracking system. If no online tracking is available, you'll need to reach out to the agent you booked the shipment with, the dispatcher, or the consignee directly.