The Key Factors Influencing LTL Freight Rates
Unlike full truckload shipping, LTL shipping rates are not fixed. There are several variables impacting the costs of LTL transportation—companies can better control LTL shipping budgets by understanding how these key factors affect rates. This article examines the core components influencing LTL freight rates and provides tips to optimize costs.
Weight: The Main Cost Driver
Weight is the primary factor determining LTL freight rates. Heavier cargo shipments lead to higher shipping rates. Why does weight play such a pivotal role in rate calculations? The principles of physics and economics are at work.
Transporting heavy loads naturally requires more fuel to move them from origin to destination. Carriers need to cover these increased fuel expenditures, so freight rates and fuel surcharges rise in tandem with the shipment weight.
Think of it this way—imagine you need to ship two packages from Miami to Seattle. Package A weighs 50 pounds, and Package B weighs 5000 pounds. Which package do you think will cost more to ship across the country?
The light 50-pound parcel can tag along in a small box truck or cargo van using minimal fuel. But hauling that heavy 5000-pound shipment over 2,500+ kilometres will require a semi-truck and a lot more diesel to transport that weight safely.
Heavier cargo requires increased resources and expenses. Carriers transfer these costs through higher shipping rates for heavy LTL freight. Returning to the example above, Package B would incur much higher base shipping rates due to its weight.
Conversely, keeping shipments as light as possible can significantly reduce LTL costs. Carefully calculating product density and shipping weights ensures you are not overcharged for excess weight.
Expect to pay more to ship heavier items, whether pallets, boxes or crated machinery. Keeping weights low is necessary to keep your LTL freight costs in check.
Distance Travelled: More Kilometres = Higher Rates
The distance a shipment needs to travel is the second most significant cost factor for LTL freight. Greater distances mean more kilometres racked up by the carrier’s trucks and, in turn, more fuel burned.
Several distance factors impact LTL rates:
- Total distance between the shipper’s pickup location and the receiver’s delivery location.
- Kilometres from the shipper’s site to the carrier’s nearest terminal.
- Kilometres from the receiver’s location to the nearest carrier terminal.
LTL rates follow defined Kilometer brackets, with rates stepping up at certain distance thresholds. For example, a carrier may charge one fee for 0-100 kilometres, another cost at 101-500 kilometres, and a different fee for 501+ kilometres. These rate tier steps based on kilometre bands will increase the shipment cost with distance.
The further a shipment must travel between origin and destination, the more costs are incurred by the carrier. Long hauls require extended labour hours from drivers. Overnight stays may be required if driving hours are capped.
Businesses shipping LTL can optimize distances by carefully analyzing their supply chain network. Can your company source materials and products closer to your end destination points? Even shaving off a few hundred kilometres can net substantial rate reductions.
Consolidating LTL shipments with other regional businesses is another distance-saving strategy.
Coordinating with other shippers allows you to share space on trucks travelling to your common destination areas. This approach shortens the “legs” of your shipments’ journeys for discounted rates.
Fuel Surcharges: The Variable Expense
On top of the base freight rate, carriers will charge an additional fuel surcharge that fluctuates based on current fuel prices. The higher diesel and gasoline prices rise, the higher carriers set their fuel surcharges.
Fuel surcharges can range from 15-25% on average, but may be higher during times of very high diesel prices. Some carriers adjust surcharges weekly while others use a monthly schedule.
Many carriers base the surcharge percentage on the Canadian Weekly Diesel Prices Index published by Natural Resources Canada. This tracks average retail diesel prices across major cities.
For example, if the national diesel price index is over 115 cents per litre, a carrier may charge a 15% fuel surcharge on shipments. If diesel drops below 115, the surcharge may decrease to 10%.
Since fuel surcharges vary so widely between carriers, it pays to compare programs and find the most competitive rates for your shipping routes. Partnering with a transportation management provider can give you access to discounted fuel surcharges that larger shippers have negotiated.
The key is controlling these variable fuel costs eating into your LTL shipping budget. Don’t simply accept a carrier’s standard surcharge rates if better deals are available
Consult with knowledgeable, experienced Freight Brokers to ensure your business secures optimal LTL shipping rates.
Freight Accessorial and Handling Fees
In addition to base freight charges, carriers often impose accessorial or handling fees to cover services beyond basic shipping and delivery. These additional surcharges help pay for:
- Lifting heavy pallets and loads.
- Using specialized equipment like lift gates to lower items from the truck.
- Delivering to challenging locations like construction sites.
- Waiting time fees if the carrier needs to wait excessively at pickup or delivery.
- Moving freight within warehouses and distribution centres.
The general rule of thumb is that standard LTL truckload rates assume dock door pickup and delivery.
Any additional required specialty services may incur extra service fees. The costs typically increase with shipment weight, with heavier items requiring more resources for labour and equipment.
Optimize Your LTL Shipping
The primary factors determining your LTL shipping rates are the shipment weight, distance travelled, and additional required services between origin and destination.
Keep these tips in mind to optimize your LTL freight shipments:
- Accurately weigh all shipments to avoid under-calculating density.
- Consolidate LTL orders with other regional businesses when possible.
- Analyze the supply chain to source items closer to the end destination.
- Compare carrier fuel surcharge programs and accessorial fees.
- Partner with a logistics provider to access discounted LTL rates.
- Use online freight calculators to estimate costs before shipping.
Work with our experienced team of Freight Brokers to assist with your preparation and analysis to better manage these LTL shipping variables.
We’ve helped our clients improve their operations for smoother logistics at lower costs. Understanding the core factors influencing LTL freight rates helps businesses stay proactive and budget-conscious—our experts can help ensure your business secures the optimal LTL shipping rates for your logistics needs.
