Your freight rates are not set in stone. While carriers present a standard set of charges, many of the variables that determine your final cost are within your control. By proactively managing how you pack, classify, and schedule your shipments, you can directly influence your expenses. The key is knowing which levers to pull. A deep understanding of the factors behind less than truckload pricing gives you the power to negotiate from a position of strength and implement smarter shipping practices. This guide provides actionable insights into these factors, helping you identify opportunities to secure better rates and reduce your overall freight spend.
Part of watching the company’s bottom line is understanding the most economical ways to ship freight. Less than truckload (LTL) shipping can help your company do that, and you can optimize the costs by knowing how the various shipping factors influence LTL shipping rates and service levels. Determining whether to send goods as parcels, LTL, or full truckload (FTL) is, of course, another decision tree. But breaking down the LTL freight shipping factors can actually help your supply chain managers determine if LTL freight makes sense from a cost and convenience level.
What is the LTL shipping method?
LTL vs FTL, Do you know the difference? Well, an FTL means full truck load and is used for large shipments that take up the entire space or weight limits of a truck. On the other hand, an LTL shipment or less than truckload is typically one with freight weighing between 150 and 15,000 pounds, though that upper number varies based on the source. The idea is that multiple shippers use the same LTL carrier and truck to haul their cargo together. By putting several shippers’ freight on one truck, the shipping cost for each company is less than they’d pay by themselves for an FTL shipment. LTL cargo uses a hub and spokes model, where freight doesn’t necessarily go directly to the final destination. It may go from one central hub to distribution centers. The cargo may change to a different freight carrier and truck along the way, as it gets closer to its final destination. Because of the hub and spokes model, the LTL shipping method can take more time than the direct FTL shipping method, but the tradeoff is lower overall LTL shipping costs. With an LTL shipment, shippers also typically have more service options, like access to liftgates and the ability to use inside pickup and delivery. These may come with accessorial charges, but they can offer a convenience not always found with FTL shipments. Tracking is usually available from the LTL freight carriers as well.
When to Choose LTL vs. FTL
Making the right call between LTL and FTL often comes down to a few key factors. Let’s break down the two most important ones: the size of your shipment and how much you can risk potential damage.
Weight and Size Guidelines
The most straightforward factor in the LTL vs. FTL decision is the physical size and weight of your freight. LTL is designed for shipments that don’t require an entire truck. Generally, if your freight weighs between 150 and 15,000 pounds, it’s a prime candidate for LTL. These shipments are often consolidated onto pallets, making them easy to combine with freight from other companies. Since weight is the biggest driver of cost in this model, keeping your shipment within this range is key to realizing the savings LTL offers. Choosing the right shipping mode is a critical part of managing your expenses, and making an informed decision here can significantly impact your bottom line. Proper modal optimization ensures you aren’t overpaying for space you don’t need.
Risk of Damage
Beyond the numbers, you have to consider the nature of your cargo. Because LTL shipments share truck space, they follow a hub-and-spoke model. This means your goods will likely be loaded and unloaded multiple times at different terminals as they move through the carrier’s network. Each touchpoint introduces more handling and, consequently, a higher chance of damage. This is a crucial consideration for fragile, high-value, or perishable items. In contrast, FTL shipments are loaded once and remain on the same truck until they reach their final destination. This direct route means significantly less handling and a lower risk of damage. If protecting your product is the top priority, you can reduce distribution costs in other ways, as the added security of an FTL shipment might be the smarter investment.
How are LTL freight rates calculated?
The LTL freight rate is calculated based on a several factors. Not all these factors will apply in every situation, but here are the most common ones.
Freight class
Carriers rely on the National Motor Freight Classification system, with its 18 commodity classes. Shippers need to determine factors like the product value, cargo density, stowability, and ability to move the cargo without damaging it to designate the proper freight class. Density is one of the biggest factors in determining freight class. With density, carriers look at how much space the shipment will take up, relative to its weight. To calculate density, the total weight of the freight would be divided by the volume. Freight shipping that is less dense takes up more space for its total weight, and can cost more to ship than denser cargo. The pricing structure may be per hundred pounds, aka hundredweight pricing. LTL freight carriers sometimes use a chart with the price per hundredweight. As the freight weight goes up, the freight shipment can move into a lower pricing category per hundredweight. Freight all kinds (FAK) is another kind of classification, which accounts for multiple products in different freight classes. With FAK, it’s all billed using the same freight class.
Ease of Handling
How easy is it for a carrier to move your freight on and off the truck and around the terminal? This is a major consideration in LTL pricing. If your shipment is an unusual shape, extremely heavy, or fragile, it requires special attention. Standard, uniformly stacked pallets are the easiest and cheapest to handle. But items that are difficult to load, require special equipment, or can’t be stacked with other cargo will often come with additional handling fees. Carriers need to account for the extra time, labor, and risk involved. Properly packaging your freight to make it as easy to handle as possible is a simple way to keep these accessorial charges off your invoice.
Liability
Liability refers to the risk a carrier takes on when transporting your goods. If your freight is high-value, perishable, or prone to damage or theft, the carrier’s liability increases. Think about shipping expensive electronics versus durable steel parts; the financial risk associated with the electronics is much higher. To offset this risk, carriers may charge higher rates for items with greater liability. This covers the potential cost of a claim if the goods are damaged or lost. You can manage these costs by ensuring your products are packaged securely and by understanding the carrier’s liability limits, which is a key part of any effort to reduce distribution and fulfillment costs.
How to Find Your Freight Class
Determining the correct freight class is one of the most important steps in getting an accurate LTL quote. Misclassifying your freight can lead to costly adjustments and billing disputes from the carrier. The freight class is determined by four factors: density, stowability, handling, and liability. You can find your freight class by using an online calculator, consulting the National Motor Freight Classification (NMFC) guide, or checking with your carrier. For businesses shipping a variety of products, getting this right every time can be a challenge. This is where working with logistics experts can be a huge advantage, as they can help ensure accuracy and even negotiate FAK (Freight All Kinds) classifications to simplify your pricing structure as part of an LTL contract optimization strategy.
Pallet rate
Some truckload carriers use a pallet rate instead of more complex freight shipment pricing. The carrier may give discounts based on the number of pallets shipped, so shipping one pallet would be the most expensive option on a per pallet basis. By shipping multiple pallets, the price per pallet drops accordingly. The carrier can base the price on the pallet size and the amount of space it occupies. They may also base it on whether the pallets can be stacked.
Mode
The freight rate for cargo needing expedited service will be higher than freight, allowing for a slower shipping time frame.
Type of cargo
Cargo with special needs, whether refrigerated, frozen, or containing hazardous items, will cost more to ship than cargo needing no special handling.
Distance
Not surprisingly, the shipping rate for cargo that needs to cross the country will be higher than the same cargo moving one state over. Truckload carriers serving the needed region can handle the entire shipment themselves. If you use a trucking company that has to transfer the cargo part way, this could raise the LTL pricing, if they don’t handle the entire route.
Minimum charges
Truckload shipping companies use minimum or base charges to set a floor level price for all cargo. If your freight costs fall below that, they will charge you the minimum fee. Some call it an absolute minimum charge.
Linear floor spacing
An LTL shipper will need to stay within the linear floor space negotiated and noted in the freight quote. Otherwise, the LTL shipper may get assessed a penalty or over-length charge, raising LTL shipping costs considerably. The freight carrier needs to know what size the cargo is to know it will all fit.
Accessorial charges
If additional services are needed, they will be included in the LTL quote. Accessorial charges can include inside pickup and delivery, limited access delivery, liftgate usage, residential pickup or delivery, and any special handling charges for refrigeration or hazmat materials.
Fuel surcharge
Fuel surcharges are considered an accessorial charge as well, even though it’s not something your company would request as an extra service. It is typically based on a percentage of a shipment’s base cost, using a national standard rate for diesel fuel. As a result, this fee fluctuates based on pricing.
The Importance of Accurate Shipment Details
To get the most accurate LTL shipping quote, you need to provide your carrier with specific, correct details about your shipment. Think of it as giving them the complete blueprint; any missing or incorrect information can lead to costly adjustments later. Your final bill is a combination of several charges, and it all starts with the data you provide upfront. This includes precise weight, dimensions, freight class, and any special handling needs. Getting these details right from the start helps you avoid surprises on your final bill and ensures you’re not overpaying due to reclassification or other unexpected fees that can be caught with a thorough invoice audit and recovery process.
Typical LTL Cost Benchmarks
While rates are always specific to the shipment, it helps to have a general idea of what to expect. LTL shipping can cost anywhere from $0.15 to $0.30 per pound, but this is heavily influenced by factors like weight, distance, and freight class. For standard shipments between 150 and 15,000 pounds, you might see costs ranging from $50 to over $5,000. On a per-mile basis, shorter routes often fall between $1.50 and $2.50 per mile, while longer cross-country hauls can drop to between $0.50 and $1.00 per mile. Knowing these figures is a great starting point, but the real power comes when you can benchmark your rates against the market to ensure your carrier contract is truly competitive.
Seasonal Demand
Just like with airline tickets, LTL shipping rates are subject to the laws of supply and demand. During peak seasons, such as the holiday rush or back-to-school, carrier capacity tightens, and rates tend to climb. This is when more shippers are competing for limited space on trucks. Planning your shipments around these predictable peaks can lead to significant savings. When that’s not possible, having a flexible logistics strategy becomes crucial. Working with multiple carriers can provide more options when your primary provider is at capacity or charging a premium. A smart carrier diversification strategy ensures you have reliable and cost-effective options year-round, regardless of seasonal demand.
Understanding Your Freight Bill
Your freight bill is more than just an invoice; it’s a detailed breakdown of your shipping costs. To avoid confusion and overcharges, it’s essential to provide accurate and complete information to your carrier from the very beginning. The initial quote is an estimate based on the details you provide, but the final bill will reflect the carrier’s verified measurements and any additional services required. This is where you’ll see the base rate, fuel surcharges, and any accessorial fees clearly listed. Regularly reviewing these bills is key to effective spend management, as it allows you to spot discrepancies, understand your true costs, and identify opportunities for future savings.
How do I get the best LTL rate?
There are many ways to save on LTL freight costs. A shipper can sometimes tweak their cargo based on the previously discussed factors. That may involve packing your cargo more efficiently and using pallets instead of just cartons. Instead of shipping a lot of smaller shipments, your company can bundle and wrap them on one pallet. By minimizing your load volume, you can negotiate better rates.
Use pallet size and dimensions your carrier allows
If possible, use the pallet size and dimensions your carrier allows, so you don’t accrue additional charges. If the pallets are stackable, this can also lower the cost, as the carrier can then fit more on the truck. Ensure the dimensions are proper before the goods are dropped off at the distribution center or before the carrier picks them up. Complete all documentation properly, and label them properly too.
Negotiate LTL freight rates
You can also negotiate LTL freight rates, both the base rates and the accessorial rates. This can be done by developing good relationships with the freight company, and using them regularly. If you have relationships with a parcel carrier, you can also likely use them as a freight company. For example, UPS Freight is a division of UPS.
Use a freight broker
Some shippers use a freight broker to find the best truckload rates. Freight brokers may have access to lower rates since they have relationships with many carriers and can book based on volume. Load consolidation is another option. You can combine your load with other companies, even for full truckload freight, to save on costs. When comparing rates, look at the bottom line in addition to the various accessorial charges and base charges. Also, understand the service levels. If one shipping quote is lower, but it will take a lot longer for that LTL load delivery, it may not be worth the lower fee.
Ship During Off-Peak Times
Just like holiday travel, LTL shipping has its own peak seasons. Capacity often tightens and rates climb during the summer months when retail and agricultural shipments are at their highest. On the other hand, winter weather can introduce delays and potential surcharges in certain regions. If your business has some control over its inventory flow, try scheduling larger, non-urgent shipments during off-peak times, such as early spring or fall. Planning ahead to avoid these seasonal rushes can help you secure better rates and more reliable capacity, which is a straightforward way to manage your overall freight spend.
Be Flexible with Pickup and Delivery
A little flexibility can make a big difference in your LTL costs. Carriers are always working to optimize their routes for maximum efficiency. If you can provide a wider window for pickup and delivery times, you give the carrier a better chance to fit your shipment into their schedule without making special trips. This operational efficiency can translate into savings for you. Instead of demanding a specific, narrow time slot, see if you can offer a multi-hour window. This small adjustment shows carriers that you’re an easy partner to work with, which can be a valuable point during negotiations.
Consider Different Rate Structures
Don’t assume the standard freight class system is your only option. For businesses that ship a variety of products, negotiating a Freight All Kinds (FAK) tariff can be a game-changer. An FAK allows you to ship multiple products with different freight classes under a single, simplified class, which can significantly lower your costs and simplify billing. Another option is to explore pallet rates, where pricing is based on the number of pallets you ship. This can be especially beneficial for standardized, high-volume shipments. Understanding which rate structure best fits your shipping profile is a critical part of carrier contract optimization and can lead to substantial savings.
Other ways to get the best LTL shipping rates
Carriers are incentivized by volume, so if you plan to continue sending LTL or FTL freight, it’s worth seeing how you can lower your freight costs.
Contract Optimization
If you are contracting with a carrier for longer terms shipping, you can optimize your contracts by using professional negotiation help from experts. Contracts can be negotiated with one or more carriers. These negotiations involve not only the base rates, but the accessorial charges too. It can be difficult to know what factors are open to negotiation and by how much. That’s where experts like Shipware comes in, with contract optimization solutions. Our experts are former carrier-side professionals, and they can help you through the negotiation process. The contract optimization process starts with Shipware analyzing your shipping usage and shipping characteristics to understand your specific situation. We compare your individual data to benchmark data to understand where you can benefit and by how much. This can be done for freight and also for parcel service. This type of guidance saves Shipware customers up to 30% on their shipping invoices.
Invoice Audit Recovery
Another way to save money on freight shipping is through invoice audit recovery. The Shipware tool identifies service failures and billing errors, and then applies the credit on behalf of the shipper. The credits go straight into the shipper’s account, and clients can save 1% to 9% of total invoicing fees with this tool. With Shipware’s service, the software runs in the background, and clients do not need to do anything except watch credits roll in. Clients pay no up-front costs, and all fees are based on a percentage of savings gained from using the tool. Shipware’s tool automatically uploads invoices into its system with an easy and fast connection. Shipware also follows up on any eligible refund amounts, so the client doesn’t have to make any effort. With both contract optimization and invoice audit recovery, a shipper can save a lot on logistics, including on LTL truckload pricing. Small errors in pricing and invoicing can add up, as can small changes in LTL freight contracts. Please contact us to learn more about how to save money on your LTL shipping. You can reach us at (858) 879-2020. Contact us!
Frequently Asked Questions
What’s the most common mistake shippers make when calculating LTL costs? The most frequent and costly mistake is providing inaccurate shipment details. Guessing on weight, rounding dimensions, or misidentifying the freight class might seem small, but carriers verify everything. When they find a discrepancy, they’ll reclassify your shipment, which almost always results in a higher rate and additional fees. Starting with precise, correct information is the single best way to ensure the quote you get is the price you actually pay.
My freight class seems to change sometimes. Why does this happen and how can I prevent it? This usually happens when a carrier inspects your shipment and determines the freight class you listed is incorrect, leading to a reclassification and a billing adjustment. It could be due to an error in calculating the density or a misunderstanding of the product’s stowability or handling needs. To prevent this, be meticulous about calculating your freight class for every shipment. For businesses with a wide range of products, negotiating a Freight All Kinds (FAK) classification with your carrier can simplify this process by allowing you to ship different items under a single, predetermined class.
Are all those extra fees on my freight bill, like fuel surcharges and liftgate fees, negotiable? Many of them are. While some charges like fuel surcharges are tied to market rates, the way they are calculated can often be negotiated. Other accessorial fees, such as those for residential delivery or liftgate services, are absolutely negotiable parts of a carrier contract. Consistent, high-volume shippers have the most leverage to get caps or discounts on these fees. It’s all part of the overall rate and service agreement you establish with your carrier.
Is it better to stick with one trusted LTL carrier or use several different ones? There are benefits to both strategies, and the right choice depends on your business needs. Working with a single carrier can build a strong relationship and may lead to better volume discounts. However, using multiple carriers gives you more flexibility, especially during peak seasons when capacity is tight. It also allows you to place shipments with carriers that are most efficient in specific regions and keeps pricing competitive. A diversified carrier strategy often provides the best balance of cost and reliability.
Besides negotiating rates, what’s a simple, immediate change I can make to lower my LTL costs? Focus on your packaging. How you prepare your freight has a direct impact on its cost. The easiest change is to consolidate smaller shipments onto a single, neatly packed pallet whenever possible. This improves your freight’s density, which can lower its freight class. Also, ensure your pallets are stable, stackable, and easy for a forklift to move. The easier your freight is to handle, the fewer special charges you’re likely to see on your bill.
Key Takeaways
- Know the factors that determine your rate: Your final LTL cost is directly tied to details like freight class, density, and handling needs. Optimizing how you classify and package your shipments is the most immediate way to influence your expenses.
- Use timing and flexibility to your advantage: Shipping costs fluctuate with demand. You can secure better rates by scheduling shipments during off-peak seasons and providing carriers with flexible pickup and delivery windows, which helps them improve their own efficiency.
- Go beyond the standard rates with expert help: The rates you’re quoted are not final. Significant savings are often found by professionally negotiating carrier contracts and using automated invoice audits to catch and recover funds from billing errors.
