As e-commerce drives more regional and local freight moves, truckers can take advantage if they know how to charge for LTL freight
In case you haven’t heard, e-commerce is a big thing. And that means e-commerce freight needs to be moved, often in less-than-truckload (LTL) applications. LTL loads can be an attractive opportunity for truck drivers as they often travel shorter distances meaning more home time for drivers.
Traditionally, finding LTL loads has been a bit more difficult for truckers. While load boards exist for full truckload freight, similar options for LTL freight are harder to find. That is beginning to change and with that comes opportunity.
But, if you are new to LTL freight, how do you price it?
Unlike truckload freight that is priced based on the mile, LTL freight is typically priced based on dimension and weight. And there are national standards that help determine that price. First, though, you need to know the size of your trailer or truck. Do you have a 53-foot trailer with a 96-inch inside height? Or a 48-foot trailer with a lower roof? What if you are driving a straight truck, is it 16 feet or longer? A 16-foot truck can hold about 800 cubic feet while a 26-foot truck can handle 1,400 cubic feet.
These are important calculations to know, because while you may be charging based on weight of the shipment, there is a limit as to how much freight you can put into the vehicle.
To start with, familiarize yourself with the National Motor Freight Classification (NMFC) book by National Motor Traffic Association. This book details how to price LTL freight.
According to NMFC’s website, “The National Motor Freight Classification is a standard that provides a comparison of commodities moving in interstate, intrastate and foreign commerce. It is similar in concept to the groupings or grading systems that serve many other industries. Commodities are grouped into one of 18 classes—from a low of class 50 to a high of class 500—based on an evaluation of four transportation characteristics: density, handling, stowability and liability.”
Shippers and carriers don’t have to participate in NMFC, but doing so provides a standard that makes scheduling and pricing loads easier.
To ensure that as a carrier you are charging the proper amount for LTL freight, and that shippers are paying the proper amount, third-party logistics provider Cerasis put together a list of factors that go into LTL rates. To properly calculate the price, you first must know the density and weight of the shipment. To do that, measure the height, width and depth and multiple these numbers to obtain the cubic footage. Divide that by the total weight to get the density.
Using the NMFC classification system splits LTL freight into weight classes. Generally, the more a shipment weighs, the less a shipper pays per hundred pounds. There are 18 different weight classes, ranging from 50 to 500. According to Cerasis, “lower classes represent very dense freight that is difficult to damage and is easy to handle.” These classes tend to have lower rates.
Distance to destination is also a factor and whether the shipment needs to be passed along to another carrier for final delivery. Most carriers also have base rates that are priced on a 100-pound baseline and differ based on the freight classification.
There is also something called “freight all kinds,” (FAK). This is an agreement between a shipper and carrier to price all freight – regardless of classification – on the same pricing schedule. “For example, a client that ships multiple commodities ranging from 50 to 100 could negotiate an FAK with the carrier to rate all items at class 70. This can be a source of significant savings for clients by reducing the amount paid on higher class shipments,” Cerasis writes.
Pricing minimums is another consideration. Many carriers set a minimum level to move freight and this is the minimum. Any price below that and the carrier just will not take the load. Sometimes discounts, especially for shippers, can be had by working through a 3PL. A large 3PL may have relationships with LTL carriers that, because of a consistent volume, provides a discounted rate with some of that savings being passed along to the shipper. For carriers, working with a 3PL can be a source for consistent LTL freight.
Finally, accessorial charges can be applied. These include additional services such as liftgate, residential pickup or delivery, and inside delivery to name a few. Accessorial charges are usually billed as a flat fee.
Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.