How to Calculate LTL Freight Rates
How to Calculate LTL Freight Rates
Freight shipping still remains the primary method of transporting goods across the country. U.S. transportation is a multi-billion dollar industry that is expected to continue growing through the foreseeable future. The freight industry transports over 54 million tons of goods every day, or nearly 63 tons of freight per person per year. That translates to about $48 billion of goods every day. The U.S. Department of Transportation expects freight to increase by about 45 percent (or another 9 billion tons of freight) by 2040.
LTL, or less than truckload, freight shipping has quickly become one of the go-to options for small- and medium-sized businesses that frequently need to ship goods. One of the biggest benefits to LTL freight shipping is its price. It is generally more cost-effective than other shipping methods. Let’s take a look at how LTL freight shipping rates work.
Understanding LTL Freight Shipping
With less than truckload freight shipping, you ship your goods in a small portion of a trailer instead of taking up the entire trailer. Several shippers share the same trailer space, allowing the carrier to fill a truck to capacity without requiring all of its freight from a single business. Thanks to the nature of this method, you only pay for the portion of space that you take up, which ultimately helps you save money on shipping costs.
Unlike other shipping methods, less than truckload shipping operates via a hub and spoke model. Terminals act as the spokes that all connect to a larger hub, or distribution center. Goods are gathered at local terminals and transported to distribution centers, where they are delivered or loaded onto other trucks for further transport.
Factors That Affect LTL Shipping Rates
There are a variety of big and small factors that can determine an LTL carrier overall shipping rates, but the main components that you should focus on as a business are:
- Location: Location refers to both where you are shipping from and to. The further the distance between these two points, the more expensive the shipping rates. That makes sense, but many carriers also take into account how close the origin and destination are to major metro areas, which often act as the main hubs for shipments.
- Dimensions, Weight, & Freight class: All shipments are categorized based on freight class. Freight class is determined by a shipment’s dimensions and weight, which is calculated to freight density, a measure of pounds per cubic foot. The lower the freight density of a shipment, the higher the freight class. Shipments with a higher freight class generally have higher shipping rates. However, when you negotiate the price, some carriers may offer to ship your goods through freight of all kinds (FAK) rates, which usually means lower shipping rates for you. For example, you may have goods with a freight class of 100 that a carrier may decide to ship at FAK rates, dropping the freight class down to 50 for reduced shipping rates. Dimensions and weight also help the carrier establish trailer space and can help determine how fragile your goods may be.
- Freight Type: Fragile, perishable, or hazardous goods may lead to higher shipping rates as they usually require special equipment for handling and storage.
- Shipping Mode: If your freight is time sensitive, many carriers offer expedited shipping, which is generally only reserved for urgent cases. Expedited shipping is generally pricier than standard shipping.
- Fuel: Carriers will normally add fuel surcharges to the line haul costs. Fuel costs change weekly and are usually based on the national average cost of diesel. Fuel costs are usually cheaper with less than truckload shipping because you are splitting the cost of diesel with the other LTL shippers sharing the trailer space.
AuptiX has one goal: changing the way that small- and medium-sized businesses ship their less than truckload freight. Unlike other companies, we provide the lowest shipping rates possible regardless of the freight volume.
We combine the spending power of thousands of companies and develop different routes that maximize efficiency and significantly reduce the risk of damage. If you have more questions about the elements that go into LTL freight shipping rates or would like a quote for your freight shipping needs, please contact us today.
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