The world of less-than-truckload (LTL) shipping can be difficult to navigate. There are several factors that determine pricing, which can make it difficult to find the best carrier. Due to strained capacity in full truckload (TL) shipping, many shippers have turned to LTL carriers. Because of that, LTL capacity is feeling the effects of the capacity crunch, making it even more complicated to ship with this mode.
The LTL mode of shipping is used for smaller shipments that are too large to be sent as parcel, but too small to fill an entire truckload. Shipments usually weigh between 151 and 20,000 lbs. Typically, LTL carriers collect freight from various shippers and consolidate that freight onto trailers for line-haul to the delivering terminal or to a hub terminal. Then, if necessary, the freight will be further sorted and consolidated for additional line-hauls.
Shippers who use LTL services should learn carrier-friendly behaviors. If a carrier knows it can take your freight consistently and efficiently, you will become a preferred shipper. This is because carriers now have the upper hand and can choose which freight they prefer to haul. Continue reading, as we outline how shippers can become more carrier-friendly and understand the many aspects of LTL shipping.
Guide Point #1: Filling Out the Bill of Lading Correctly
A bill of lading (BOL) is the most important document in the shipping industry. It is a legal document between a shipper and a carrier detailing the type, quantity and destination of the goods being carried. It is created by the shipper and sent to the carrier.
A BOL serves as a receipt for the goods shipped, evidences the contract between carrier and shipper, designates a consignee (the person or company that receives the shipment) and functions as a document of title.
What information is included on a BOL?
- Shipper’s name and address
- Receiver’s/Consignee’s name and address
- Purchase order number or special account numbers used for order tracking
- Special instructions
- Date of the shipment
- Number of units being shipped
- Type of packaging (including the material of manufacture and common name)
- The NMFC freight classification
- Exact weight of the shipment
- Declared value of the goods being shipped
It’s essential that the data on the BOL is correct. It provides all the information that the driver and carrier need to process the shipment and invoice it correctly. Incorrect information on a BOL will lead to additional charges from a carrier and will slow the whole shipping process down, making your future freight unattractive to a carrier.
Guide Point #2: Palletizing
You will want to use pallets whenever possible. Pallets make shipments easier for carriers to move. When your freight is consistently easy to move, a carrier will favor your shipments, and offer you capacity before others.
There are times when a shipper should not palletize shipments, including:
- When items are light enough to be stacked on top of heavier, palletized freight
- When a shipment isn’t large enough to cover the entire surface of a pallet
- When boxes or packaging have significant air space and can be crushed easily
- When a shipment is too large or irregularly shaped to fit on a pallet
If you are unable to ship your products using pallets, then your freight is most likely irregular. This is not necessarily a bad thing, but expect extra accessorial charges from LTL carriers for the time they will spend handling your freight.
Guide Point #3: Accessorial Charges
LTL accessorial charges compensate carriers for additional services and equipment that goes beyond standard shipping procedures. It takes time and money for carriers to provide special services. These charges can add up to a significant part of the overall shipping cost. You can’t escape all accessorial charges, but you can reduce some charges and avoid others.
LTL carriers charge accessorial fees because it allows baseline service rates to remain competitive. These additional fees vary in definition and cost from carrier to carrier. However, there are 13 accessorial charges that are standard across the industry. The following list explains the different fees and how you can mitigate them.
Accessorial Charges: Organizational
- Appointment/Check Call: Sometimes, the BOL states that the carrier needs to call the consignee to schedule an appointment for delivery. Often, the carrier calls the consignee and learns that an appointment is not necessary. The carrier will then add an extra charge for the administrative time lost attempting to schedule an appointment. This is an easy one to avoid: fill out your BOL correctly.
- Reweigh: Weight is an essential factor in LTL pricing. If you list the wrong weight for your shipment, the carrier’s equipment may not adhere to road weight restrictions and other LTL regulations. Actual shipment weight can differ from the weight stated on the BOL by about 15 lbs. Reweighs are assessed at the carrier’s terminal and sometimes the shipper will have no control over reweighs, but you can lessen the number of these charges by correctly filling out your BOL.
- Reclassification: Carriers have the right to inspect any freight they will haul. If they suspect you have listed the wrong freight class (more on freight class later) for your shipment they will reassess what class it should be. Once again, this takes the carrier time and the shipper is charged as compensation. To avoid this charge, fill out your BOL correctly and a carrier shouldn’t have any reason to suspect you’re wrong.
- BOL Errors: As you can see, incorrectly filling out the BOL leads to several different types of charges plus bogs down both carrier and shipper. The way to fix this would be to double-check BOLs before they’re sent out. However, this may not be realistic for everyone. Using a 3PL who has a TMS will automatically generate BOLs correctly by using information from the quoting and booking process.
- Collect On Delivery (COD): Many shippers choose to have the transportation provider collect the sales price of the goods being shipped so that the carrier can simply deduct the cost of shipping, including the COD fee, and send the shipper the remaining money. This saves a shipper time on back office duties, but is the accessorial fee worth the time saved? Avoid this fee by working with a 3PL, who can take care of back office duties for shippers, saving time and money.
Accessorial Charges: Transportation
- Residential Pick Up or Delivery: This accessorial is charged due to the general public’s unfamiliarity with shipping and delivery procedures, as well as the tricky navigation of last mile logistics. Every carrier is different, but this fee usually includes pick up or delivery on the ground floor or driveway. Extra fees will be charged if a driver has to go inside, ride an elevator, climb stairs or use multiple people to move items. Many times there is no way to avoid these fees, however, you can mitigate additional or custom accessorial charges by putting standard shipping processes in place and assuring they are followed strictly.
- Sorting or Segmenting (Sort/Seg): Most retail and grocery stores require drivers to take time and break pallets into individual stock keeping units (SKUs). This fee is charged for the inconvenience it puts on the driver. Avoid this fee by palletizing in individual SKUs from your distribution center, rather than putting that responsibility on the driver.
- Limited Access: Many places don’t receive freight very often or when they do it’s during the offseason. In these cases, there usually isn’t a procedure in place and a driver has to track down somebody who knows about the shipment. This fee is for the extra time the driver must spend unloading the shipment. Many other fees can be incurred this way: if a driver has to walk through the building, if they can’t find anybody who knows about the shipment or if the driver was not notified of the proper equipment needed. Avoid these charges is to have a delivery procedure in place that specifies where the driver goes, what equipment is needed and who will sign for the freight.
- Metro Pick Up or Delivery/Remote Area: Highly populated areas with dense traffic, like New York City, or very remote areas, like the Florida Keys, slow a driver down and often there are numerous inefficiencies to overcome. A fee is charged for the extra time required to deliver to these areas. Avoiding these fees starts in negotiation. If you usually deliver to these areas (in high volumes), carriers will likely waive the fee.
- Over Dimensional: Freight that’s excessively long, fragile or doesn’t fit properly on pallets must be top-loaded. Top-loading freight requires extra time and care from the driver and the fee is given to compensate the extra effort. It is difficult to minimize this fee as you can’t change the items you ship. However, you can check out various carrier’s rules tariffs to see what they constitute as over dimensional. Another option is to ask a 3PL do this for you or have a 3PL schedule a multi-stop full truckload lane instead.
- Redelivery: When a driver is turned away for any reason or the consignee is not present for delivery, a redelivery fee occurs. Usually this occurs because a consignee needs a delivery appointment and the shipper’s BOL didn’t specify that one was necessary. Again, correctly filling out a BOL can save you and your carrier time and money.
- Accessorial Charges: Equipment
- Liftgate/Forklift/Pallet Jack: Specific pieces of equipment are needed when freight is very heavy. In this case, the BOL must clearly state what equipment is needed. Carriers have limited equipment, and if they can’t schedule usage accordingly, the shipper will be charged even more for redelivery with the correct equipment. Avoid this fee by filling out the BOL properly.
- Fuel Surcharge: A fuel surcharge covers the fluctuating cost of diesel during a shipment. This is the most common accessorial charge and is almost always included. The only ways to avoid this fee are to negotiate a long term contract with a carrier, which will still only be possible if you’re moving high volumes of freight, or partner with a 3PL whose buying power can leverage rates that can ease the impact of fuel surcharges.
Guide Point #4: Finding LTL Freight Classification
When moving LTL shipments, one of the first things to consider is freight class. Each shipment is defined by a classification, depending on the nature of the product. The cost of moving your freight depends heavily on what freight class it falls under. As we’ve mentioned, listing the wrong freight class will incur extra charges.
There are 18 different freight classes defined by the National Motor Freight Traffic Association (NMFTA): 50, 55, 60, 65, 70, 77.5, 85, 92.5, 100, 110, 125, 150, 175, 200, 250, 300, 400 and 500. Lower classes represent very dense freight that isn’t easily damaged and can be handled easily. Lower classes have lower rates. On the other hand, higher classes represent lighter, less dense freight that is fragile and not easily handled. Higher classes mean higher rates.
There are ways to conclude which freight class your shipment is in. For starters, call the manufacturer of the items, if possible, because they will already know the freight classification. Official freight classes are listed by the NMFTA and can be viewed in their National Motor Freight Classification Tariff publication. Another option is to call a 3PL and find out. Many times their TMS software has built-in freight class estimators.
There are four main factors that affect LTL freight class:
- Stow-ability: Most freight stows well in trucks, trains and boats, but some articles are regulated by the government or carrier policies. Some items cannot be loaded together. Hazardous materials are transported in specific manners. Excessive weight, length or protrusions can make freight impossible to load with other freight. The absence of load-bearing surfaces can make freight impossible to stack. Freight class helps carriers recognize freight that can’t be stowed well.
- Handling: Most freight is loaded with mechanical equipment and poses no handling difficulties. However, some freight, due to weight, shape, fragility or hazardous properties, requires special attention. Freight classifications also help carriers recognize freight that needs extra time to load or unload.
- Liability: The probability of freight theft or damage, damage caused to adjacent freight or the dangerous nature of the freight creates a huge responsibility for the carrier. Perishable cargo or cargo prone to spontaneous combustion or explosion requires special attention for safety and a timely delivery. Freight that has high liability is assigned a value per pound, which adds to the carrier’s liability.
- Density: Density guidelines assign classification 50 to freight that weighs 50 pounds per cubic foot. The Commodity Classification Standards Board (CSSB) assigns classifications 70, 92.5, 175, and 400 to freight with densities of 15, 10.5, 5 and 1 pound per cubic foot, respectively. Freight less dense than 1 pound per cubic foot is classified as 500. The density is the space the item occupies in relation to its weight. The density is calculated by dividing the weight of the item in pounds by its volume in cubic feet. Your product’s volume in cubic feet is Length x Width x Height/1,728, where all dimensions are measured in inches. The density of your item = Weight/Volume, where Weight is measured in pounds and Volume is measured in cubic feet. Algebra was a long time ago for all of us, so here’s an example:
Freight class plays a large role in the price of LTL shipping. Choosing the wrong freight class can lead to extra fees. Therefore, it is critical to select the appropriate class.
Guide Point #5: Determining LTL Pricing
LTL pricing is regulated by many different factors and varies from carrier to carrier.
There are seven main factors that control the price of LTL shipping:
- Accessorial Charges: When carriers provide extra service they will charge more.
- Freight Classification: The freight class of your shipment is important to overall cost. Carriers want dense, square and heavy shipments that won’t break easily. This fills up their truck space better and they won’t be liable for any damaged freight.
- Minimums: The absolute minimum charge (AMC) is increasing quickly among LTL carriers. This minimum charge is the charge below which a carrier simply will not go. Carriers are constantly requesting a 2 – 3% increase on contract rates, but adding $5 increases in the AMC. If the minimum charge is $70, a $5 increase is a 7.1% increase. Carriers are doing this because the costs they incur for a minimum charge shipment far exceed the costs they incur for a heavier shipment.
- Distance: Typically, the longer the haul, the higher the price per-hundred weight will be. Many LTL carriers only serve a specific region so you must consider how many zip codes a carrier services directly. If a shipment is sent to a location outside a carrier’s normal service area, the trucking company will transfer the shipment to another LTL carrier for final delivery. This is called interlining, a practice that may result in higher costs due to lower discounts and higher minimum charges.
- Base Rates: All LTL carriers establish their own base rates. These rates are quoted per 100 pounds, or hundredweight (CWT), and will vary from carrier to carrier and from lane to lane. The CWT calculation is based on the freight classification. Carriers will modify their base rate depending on their need for additional volume and increase gross costs for lanes where they have a good balance between trucks and freight.
- Weight: Rates are structured so that the more a shipment weighs, the less you pay per hundred pounds. As the weight of the LTL shipment increases and approaches the lowest weight in the next heaviest weight group, it will be rated at the lowest weight category and rate in that weight group.
- Freight All Kinds (FAK): Freight all kinds is an arrangement between the client and the carrier that enables multiple products with different classes to be shipped and billed at the same freight class. 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.
If you lack specific information about your freight, it could lead to many extra costs, including unnecessary high rates. Make sure to take the time and estimate the cost of your shipments correctly so you can better negotiate shipping prices.
Guide Point #6: How a 3PL Can Help Ship LTL Freight
Shipping LTL freight doesn’t have to be a headache. Industry conditions have stretched LTL capacity thin, there are countless regulations and figuring a fair price can seem next to impossible. A 3PL can overcome a shipper’s challenges with LTL by offering reliable assistance and cost-effective solutions.
One of the main benefits of partnering with a 3PL is their technology. Most logistics providers implement a transportation management system (TMS) for the shipper’s benefit at no cost. This will provide load visibility, which includes tracking shipment progress and sending delivery notifications, as well as reports on shipping patterns and carrier service quality. Third-party logistics companies have expertise implementing this advanced software, which is very helpful in planning tricky first/last mile logistics that often incur extra accessorial charges.
A 3PL, along with a TMS, can significantly reduce the amount of time your company spends on back office duties. A 3PL can fill out your BOL correctly every time. A logistics company has the technology, manpower and knowledge to process thousands of bills every day. They can audit LTL bills to ensure proper charges were made. A 3PL will also manage carrier contracts, DOT safety ratings and insurance certificates. Typically, 3PLs can manage overall transportation finances at a fraction of the cost that shippers can.
3PL’s also have superior carrier networks, made up of pre-qualified carrier partners. For example, at PLS Logistics Services, we have over 15,000 pre-qualified carriers in our network, ready to help fulfill our clients’ shipping needs. 3PLs can always secure capacity for you when and where it is needed. Not to mention, most logistics companies can leverage their buying power to secure the best carriers at the lowest possible rates on the market.
Partnering with a 3PL who is truly a consultant and is focused on solving your supply chain challenges can add tremendous value to an organization. They have the experts, experience and technology to ensure that every shipment is delivered on time and in a cost effective manner, allowing you to focus on your core business initiatives.
Leverage Our LTL Experts
In today’s transportation industry, you have to be carrier friendly to lock in consistent and reliable capacity. This isn’t always easily accomplished when it comes to shipping LTL freight. Regulations, carrier charges and other pricing factors can be difficult to keep up with on a regular basis. If you don’t stay current on the specifics of your freight and the costs of your LTL shipping, you could be spending too much on your shipping needs.