Controlling and managing freight spend is a huge part of your business. Freight shipping is complex, and shippers like you may have a lot of questions. One of the most common questions is what factors affect LTL freight rates? Knowing the answer to this question allows you to develop a better strategy and helps save you and your team time and money. We’re going to dive into what factors affect LTL freight rate so you can control your costs when shipping LTL freight.
Weight, Density, and Freight Class
LTL is different than parcel. If you’re shipping via a parcel carrier, typically the package weight and transit distance determine the cost of shipping. But LTL freight rates work differently. In LTL, there are three universally interconnected factors that affect what your LTL freight rate will be, and they are:
- Freight class
Here’s how these LTL freight rate factors are connected. The weight of your shipment impacts what the shipment’s density is, which in turn dictates what freight class your freight will be.
LTL freight carriers use freight class to make it easier to determine shipping rates for certain kinds of freight. Many shippers find it hard to accurately report freight class on their Bill of Lading (BOL) or while filling out an LTL freight quote. This can result in a rather large billing adjustment later when the carrier checks the weight, density and freight class of the shipment. Any discrepancies between the original quote and what the carrier reports will result in a billing adjustment.
You can avoid costly billing adjustments by providing accurate information, but sometimes, you might not be able to be as accurate as possible. That’s where working with a third-party logistics company (3PL) can help. A 3PL offers guidance, support and can help you better centralize your search for the right freight class. You’ll have a dedicated shipping agent who has the expertise to find you the appropriate freight class and has access to the official freight class database at their fingertips.
You can also use our freight class calculator tool to easily find the density and freight class of your shipment.
Across the shipping spectrum, distance always plays a role in determining shipping rates. The traditional origin zip code to destination zip code calculation is needed. But in LTL freight shipping, it’s a little different because the freight carrier you use might be limited in where it can travel. For example, some carriers are regional only, meaning they cannot ship freight nationwide. Depending on the LTL carrier you use, your shipment may have to go through an additional carrier or truck during transit.
Other factors also affect LTL freight rates. Carriers have to fulfill capacity and efficiently use all the space in their trailers. To fulfill capacity, carriers may charge differently on certain lanes depending on supply and demand. This is because they have to account for solving capacity issues when it comes to deadhead, backhaul and headhaul.
Partnering with a 3PL can streamline the search for the carrier and lane that best suits the shipping needs and at more affordable rates than if you go directly through the carriers. In fact, you can compare the rates of multiple carriers at the same time when you work with a 3PL.
Accessorials, or add-ons, are additional services that go beyond the traditional pickup and delivery services offered by LTL freight carriers. Accessorials play a big part in the operating procedure for you and the carrier involved. Depending on your freight shipment needs, some accessorials could be required, others may be optional.
For example, if you run your business from your home, you are considered a residential location and have to choose the residential and liftgate accessorials during the shipment booking process. You may also need other accessorials such as limited access.
Not knowing about accessorials or when you’ll need them can lead to logistical mayhem like expensive billing adjustments or cancelled pickups and deliveries. Downloading our Easy Guide to Accessorials can help save yourself from these headaches.
Up until now, all the factors that affect LTL freight rate discussed have been factors that can be controlled and incorporated into your supply chain’s best practices and procedures. But there are factors outside of most shippers’ control that affect freight rates, such as shifting trends within the freight shipping industry or fluctuating market behaviors from other industries heavily reliant on freight shipping.
As mentioned before, carriers have to fulfill capacity on their end and efficiently fill empty space on their trailers on every lane and transit their trucks are traveling. The supply and demand carriers face greatly dictates rates. When carriers are dealing with scarce supply, rates are more competitive and lower. When carriers have a lot of shipments to move, space becomes scarcer for shippers, so rates are higher.
Industries that rely heavily on freight shipping impact freight rates when they get busier. For example, the produce industry in the spring and summer drives demand for freight shipping up after a slow first quarter of the year. These shifting trends and economic conditions throughout the year are known as the four seasons of freight shipping. Knowing what to prepare for months in advance can help you control costs and better manage your budget.
The Biggest Factor
When it comes to factors that affect LTL freight rate, the most important one is whether or not you’re partnering with a 3PL like FreightCenter. To get the best freight rates, you’ll need a partner who can guide you every step of the way, understands your shipping needs, and can find you the best solutions quickly and at more affordable rates.
FreightCenter leverages a large network of carriers and shipping partners and receives discounted rates which are then passed onto shippers. Have a dedicated agent handle your shipping needs.