LTL freight shipping pricing can seem more than a little confusing to unfamiliar minds. Yet while it appears as though there is no rhyme or reason to pricing freight, complexity masks the basic economic principles underneath.
Take a step back and examine the factors going into LTL freight shipping rates and the underlying truth comes down to two elements: more volume = better discounts and small & heavy is cheaper than big and light.
The confusion and complexity generally set in when carriers charge what seem to be extra fees and cite a multitude of variables that affect freight as the reason why. Shippers are all too familiar with a new and seemingly out-of-nowhere fee tacked onto the original quote and it is important to be proactive and aware of these extra charges.
FreightorGator simplifies this process with a flat-rate – no sudden penalties or surprise surcharges at the end. The model used by FreightorGator allows shippers to confidently calculate costs weeks or even months in advance.
It’s still important for shippers to have an understanding of what goes into LTL freight pricing. Knowledge of these factors can lead to significant savings for shippers choosing to work solo.
Negotiated Tariffs and Discounts – Shippers are often surprised to learn that carrier tariffs can be negotiated. The higher the volume and frequency of a shipper, the better rates he will be able to negotiate. Infrequent shippers who do not have a relationship with a carrier will pay high retail rates unless they enlist the help of a 3PL or an LTL freight exchange service like FreightorGator.
Weight – Freight companies love heavy stuff. The rates are designed so that the heavier a shipment, the lower the price paid per hundred pounds. When the weight of LTL freight rises and nears the lowest level in the next-highest category, the shipment will be rated at the lowest weight class and rate in that section.
Density – Density is defined as weight/volume. A higher density item will weigh more and take less space. Freight companies love this. A pallet of bricks and a crate of ping-pong balls may take the same space (volume) but will not weigh anywhere close to each other (density.) Shippers can easily see how density affects LTL freight pricing.
Freight Classification – The single biggest factor in deciding LTL freight pricing is the classification a shipment falls under. There are 18 separate classes with numerical codes ranging from 50 to 500. The primary factor determining class is the density of the items. But then there are other factors considered including value, fragility, and “stowability”. The denser, durable, and easier to move around a shipment is, the lower the rate will be, generally speaking.
Shipping Minimums from Carriers – As mentioned at the beginning, carriers always prefer higher volume from shippers. Most LTL freight will be subject to a minimum price in order for carriers to preserve cost-effective business practices. The handling of any shipment has a minimum cost, no matter what its weight, and that will be passed on to the shipper.
Shipping Distance – Second to classification, distance is obviously a leading factor in determining in LTL freight pricing. The farther it goes, the higher the rate. More popular routes are typically cheaper than remote, out of the way areas, because there are more trucks and more competition to drive the price down. A shipment from Chicago to New York will likely be cheaper than one from Billings, MT to Jackson, WY though the distance is shorter.
Accessorials and Surcharges – There are often additional aspects to a shipment that will require additional work by the carrier. For example, if you are shipping a heavy item to a destination that is not equipped with a loading dock or forklift it is quite likely a lift gate enabled truck will be required for delivery. This type of thing should be anticipated in advance so it can be priced into the order. If it is not, the shipper will be back charged for this “accessorial.” As far as surcharges are concerned, the one to always expect is the fuel surcharge, which is placed on almost every LTL freight shipment by certain carriers as compensation for floating fuel prices.
3PL Markup: Until recently there were only two ways to execute an LTL shipment—one was to go to a carrier directly and ship your product, the other was to utilize a 3PL service to arrange the shipment for you. A direct shipment with a carrier is problematic if you don’t have a volume shipping agreement—without a lot of legwork, it’s hard to compare prices and determine whether you are getting a good rate. 3PLs will do this price comparing for you but will charge you a markup which can range from 10% to 40%, depending on your frequency of shipping and your relationship with the 3PL.
With the advent of freight exchanges such as FreightorGator, customers can now have full transparency of their shipping rates. They can compare prices between leading carriers and see a breakdown of carrier charges, accessorials, surcharges and booking fees. In the case of FreightorGator, only $25 is charged for booking instead of the unknown markups charged by 3PLs.