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Basic Guide to LTL Freight Class

While LTL shipping is pretty straight-forward, freight class may seem quite confusing for many. At the same time, knowing the right class of your freight is essential for shipping LTL. When shippers first come across having to move an LTL load, determining and understanding freight class may be quite a challenge.

In today ’s, we want to talk about some basics of freight classification and answer the most common questions: What is it? How does it work? Why is it important to know your freight class? How do you find the correct class for your freight?

What is it?

Freight classification was introduced by NMFTA (National Motor Freight Traffic Association) to categorize freight based on a number of characteristics and standardize pricing. All commodities are grouped in 18 classes, ranging from Class 50 to Class 500. The classification is cataloged in the NMFC (National Motor Freight Classification) tariff, and a unique NMFC number is assigned to each item.

How does it work?ltl freight class

A hundred-pound load of brick will probably be smaller and easier to handle than a hundred-pound load of ping-pong balls, right? The classification is fairly comprehensive and is based on four characteristics: density, freight stowability, ease of handling and liability. Each commodity is evaluated according to these factors and cataloged under a specific NMFC number and class. The densest and “shipping-friendly” loads will fall under Class 50, which will also be the cheapest. The least dense and “inconvenient” loads will be classified as Class 500, which will be the most expensive.

Why is it important to know your freight class?

As mentioned above, freight class directly affects the pricing. Knowing the accurate class of your freight will ensure that you know the correct shipping price upfront and avoid carrier re-class and up charges. The best way to avoid unpleasant surprises on the invoice is not only to know the correct class but the accurate NMFC number for your freight as well. The NMFC number should be on the BOL along with the clear freight description.

How do you find the correct class for your freight?

Finding the correct item and determining freight class may be a little confusing at times. If you are not yet a pro, you can reach out to your 3PL representative. They have expertise and access to the NMFC database and will be able to help you determine the class. Classifying LTL freight may be tricky, so make sure to provide extensive and accurate freight description, including weight, dimensions, packaging, and value to your 3PL representative.

Need help figuring out the correct class for your LTL freight? We can help!

 

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4 Recommendations to Save Money on LTL Shipments in 2017

Carrier.jpgLTL carriers saw all-time high revenues in 2014, then due to a decrease in fuel prices, revenue dropped in 2015. Balanced supply and demand kept LTL prices from dropping in 2016, and JOC.com reports that LTL carriers are looking forward to 2017 as freight volumes are predicted to be higher. Next year, the LTL sector could see a capacity crunch due to the ELD mandate, a slow economy and pricing models. LTL pricing is expected to increase in 2017 and fuel costs aren’t likely to see change. In order to cut LTL freight shipping costs, shippers need to be exact with freight’s weight and dimensions, package and pallet the freight properly, consider consolidation, and utilize transportation management systems.

Infographic: Breaking Down the Costs of LTL Shipping

  1. Weight and Dimensions

LTL rates aren’t straightforward; shippers find that accessorial fees and surcharges increase the total spend. uShip says that about 30% of freight invoices have some type of correction for weight, dimensions, class, or cubic feet. Shippers must be completely accurate in the measurements and weights of the freight pallet being shipped, otherwise, they will be charged for the inaccuracy.

Common Accessorial Charges:

  • Reweigh
  • Reclassification
  • Residential pickup or delivery
  • Redelivery

Download The Shippers Complete Guide to LTL Shipments for more information on accessorial charges.

  1. Packaging and Palletizing

When packaging LTL freight, pallets make shipments easier for carriers to move. With regular LTL freight, shippers palletizing their freight need to use a slip sheet put boxes into a stable position, stack the pallets in columns (not pyramids), strap them for extra safety, and use stretch wrap to avoid shifting. Most shippers are more concerned with freight arriving undamaged at the destination; unsuitable palletizing can lead to 50% of boxes’ compression strength loss. Learn more about the Do’s and Don’ts of Palletizing here.

  1. Optimizing Freight with ConsolidationFreight-1.jpg

Freight consolidation supports shippers who want to cut down costs and emissions. Consolidating LTL shipments into full truckloads helps companies decrease transportation costs, drives consistency and reduces inventory. Load consolidation saves money by improving truckload utilization and taking advantage of the less expensive truckload rates. According to Inbound Logistics, companies can reduce transportation costs from 20-35% by converting LTL shipments to truckload shipments.

Read: Market Update: LTL Volume Down, but Prices Stay Firm

  1. Less-than-Truckload Technology

Transportation management software simplifies the LTL shipment process. Technology helps shippers with carrier selection, rates, invoicing, and other details. PLS PRO 2.0, for example, has standout benefits for LTL shippers: automatic density class estimator, data integrity, auto GL coding, accessorial data with calculated fees, and real-time shipment visibility. For shippers, a TMS reduces inbound and outbound freight expenses, reduces administrative costs through automation and highlights available carriers with an estimated rate, transit time, lane and billing information.

Want to learn more about PLS LTL services and PLS PRO 2.0? Email ltlsales@plslogistics.com.

How to Negotiate Lower LTL Freight Rates

Operating costs are rising for LTL carriers due to a number of factors – the driver shortage, rising pay, and aging equipment. Spot market and contract rates have both risen to compensate for these extra costs, however, contract rates rose higher than spot market rates and remain higher. Knowing how to get and negotiate the lower LTL freight rates is important if you want to save costs.

This is unusual since promising freight volume ahead of time typically leads to freight savings.

So, why have contract rates risen above spot market rates?  Because contract carriers bought a record number of trucks in 2015 and boosted driver pay, all in an effort to regain capacity and reclaim market share that had been lost to spot market providers.

how to negotiate LTL freight rates

These rates aren’t going down anytime soon, as operating costs continue to climb. Unfortunately for shippers, the transportation industry has a serious shortage of capacity and most companies find it necessary to pay higher LTL contract rates to get truck capacity. How can you avoid paying such high contract rates for transportation?

Here are 3 tips to negotiate lower LTL freight rates:

Use the CzarLite Tariff

The CzarLite tariff for LTL freight is independent of trucking companies and is the transportation industry’s base rate standard. Most carriers develop their own tariff and encourage you to use it. For example, a carrier may offer you an 80% reduction on fuel surcharges if you use their base rate, which sounds great, but their base rate will likely end up costing more than the savings. The CzarLite tariff transparency into negotiations by providing you more visibility into costs compared to other carriers.

Utilize LTL Guaranteed Service Levels

Using guaranteed freight services is a way to negotiate lower base rates or GRIs in the future. Guaranteed freight is when an LTL carrier guarantees a specific service level. Carriers prefer to operate theseltl-rates-on-the-rise.jpg services – it gives them an opportunity to acquire more freight spend. With guaranteed freight, a shipper immediately spends less time on track and trace operations. By paying for a service that carriers want to perform, you gain preference and can leverage lower rates on standard shipments, fuel surcharges or GRIs during future negotiations.

Highlight Attractive LTL Freight, but Don’t Hide Unattractive LTL Freight

Shippers should highlight attractive freight during rate negotiations. Carrier-friendly freight, in general, allows carriers to utilize their truck space effectively. Dense, small, and stackable freight that fits properly on a pallet will be easy and efficient for a carrier to haul. It’s also important to disclose information ahead of time about freight that will be difficult or inefficient to haul.

Eliminate any surprise charges and keep the carrier compliant with all state and safety regulations. LTL carriers need to know their risk liability before hauling freight because this affects their view of the value and cost to carry the freight. Carriers are rated by a CSA system by DOT. Losing rank in CSA due to compliance issues the carrier was not notified about can hurt their chances of getting new business, and you can be sure they won’t want to give you any discounts.

Learn more about reducing transportation spend in post 7 Steps to Reduce Freight Costs.

Need help with freight rates? Get a free quote right now! 

7 Factors that Determine LTL Rates

LTL shipments typically weigh between 151 and 20,000 lbs. LTL carriers will usually apply a discount on shipments starting at 151 lbs on one pallet and up to 5,000 lbs on 5 pallets. Shipments larger than 5 pallets can still ship with an LTL carrier but these moves are normally considered volume moves and are spot quoted by the carrier’s rate department.

LTL Pricing Factors

LTL rates can be very confusing. Unlike truckload which has rates usually based on a per-mile rate or a price per-hundred weight plus a fuel charge, many factors regulate LTL rates which will most definitely impact the cost of a shipment.

Less-than-truckload (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. 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 where the freight will be further sorted and consolidated for additional line-hauls.

In most cases, drivers start the day by loading up and heading out to make deliveries first, then begin making pickups once the trailer has been emptied for return to the terminal for sorting and delivery next day; thus, most pickups are made in the afternoon and most deliveries are performed in the morning.

Here are 7 factors that determine LTL pricing:

  1. Minimums. The pricing that is increasing the fastest with LTL carriers is the absolute minimum charge (AMC). 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 $5 increases in the minimum charge. If the minimum charge is $70.00, a $5 increase equates to a 7.1% increase. Carriers are doing this because the costs a carrier experiences for a minimum charge shipment far exceeds the costs they experience for heavier shipments
  2. Distance. Typically, the longer the haul, the higher the price per-hundred weight will be. Many LTL carriers only serve a specific geographic 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.
  3. Base Rates. All LTL carriers establish their own base rates. These rates are quoted per 100 pounds (aka – CWT),  and will vary from carrier to carrier and from lane to lane. The CWT calculation is based on the freight classification. A good fact to point out is 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.
  4. 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.
  5. Weight. Rates are structured so that the more a shipment weights, 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.
  6. Classification of Freight. Every piece of freight has a classification within the LTL world. Classes are published by National Motor Freight Classification (NMFC). NMFC has established 18 different classes ranging from 50 to 500. The class is determined by product density, value, stow-ability, handling and liability. Lower classes represent very dense freight that is difficult to damage and is easy to handle. Lower classes have lower rates. Conversely, higher classes represent lighter / less dense freight that typically takes up more space. The higher the class, the higher the rate will be. For additional information on freight classification see our post – 4 Characteristics that Determine Your LTL Freight Class.
  7. Accessorials. Accessorial charges stem from extra services performed by the carrier that goes beyond the typical dock to dock / business to business pick up and deliveries. Common examples of these charges are lift gate service, residential pickup or delivery, limited access locations (i.e. jails, prisons, churches, schools, storage units) and inside delivery. Accessorial charges can be negotiated to a flat rate or even waived altogether. A fuel surcharge is the most common accessorial as it’s typically factored in on every shipment.

If you lack the specifics of your freight as it relates to the above information, it could lead to a 25-40% increase in your freight charge. Fortunately, the unnecessary costs are avoidable. Getting to know these 7 characteristics of an LTL freight rate will help you control costs. 

What do you think? Are there any other factors that affect LTL pricing? Leave your comments below!

6 Key Factors That Determine LTL Freight Class

determine ltl freight classWhen it comes to moving less-than-truckload shipments from point A to point B, one of the first things to consider is its definition in the trucking industry. In the world of freight shipping, each product definition is its classification. It is important to know how to determine LTL freight class because it affects the final price of your shipment.

The class of freight plays a prominent role in calculating how much the carrier will charge you for transporting it.

How many freight classes are there?

There are 18 different classes LTL freight can ship under: 50, 55, 60, 65, 70, 77.5, 85, 92.5, 100, 110, 125, 150, 175, 200, 250, 300, 400 and 500. The higher the class, the higher the rate for every hundred pounds you ship.

How do you determine LTL freight class?

The many definitions or classes of freight are listed in the National Motor Freight Classification tariff, commonly referred to as the NMFC. The NMFC is a publication for motor carriers containing rules, descriptions, and ratings of all commodities.

There is a publication to classify freight for freight bill rating purposes. Besides defining the classes of shipping commodities, the NMFC also assigns item numbers to each type of commodity. The item number relates not only to the commodity itself, but to its packaging, the material of the commodity, and other considerations.

Item numbers associate with rates as well as commodity classifications. PLS Logistics Services’ LTL department is very familiar with the NMFC classification and can help you determine the proper class of your item.

Which factors affect LTL freight class?

Before a class can be determined, there are some characteristics of the freight that needs to be identified. You need to know how the freight’s density, the stow-ability, how to handle it, and what type of liability it assumes. There are several main factors that determine the LTL freight class, including:

Dimensions

Essentially, dimensions play a large role in estimating the final price of your shipment. Especially, when shipping LTL. Although it goes along with many other factors, length, width, and height are important. It is crucial to provide an exact and correct number since even small discrepancies may result in additional charges.

Weight and Packaging

The next critical measure of your shipment’s cost is the actual weight. Most likely you’ll have to palletize your freight, so the actual weight means the weight including the pallet. Additionally, your shipment’s package will be considered when determining the freight class.

Density and Value

Density guidelines assign classification 50 to freight that weighs 50 pounds per cubic foot. The Commodity Classification Standards Board (CCSB) 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. You calculate density by dividing the weight of the item in pounds by its volume in cubic feet. Your item’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.

Stow-ability

Most freight stows well in trucks, trains, and boats, but some articles fall under the regulation by the government or carrier policies. Some items don’t fit together. You need special conditions to move hazardous materials. Excessive weight, length or protrusions can make freight impossible to load with other freight. The absence of load-bearing surfaces makes freight impossible to stack. A quantifiable stow-ability classification represents the difficulty in loading and carrying these items.

Handling

Loading freight with mechanical equipment poses no handling difficulties, but some freight, due to weight, shape, fragility or hazardous properties, requires special attention. You have to mention a classification that represents ease or difficulty of loading and carrying the freight and assigns it to the items.

Liability

Liability is the probability of freight theft or damage, or damage to adjacent freight.
Perishable cargo or cargo prone to spontaneous combustion or explosion is classified based on liability and assigned a value per pound, which is a fraction of the carrier’s liability. When the classification is based on liability, density must also be considered.

In conclusion, the class of your freight plays a prominent role in calculating how much the carrier will charge you for transporting it. Knowing the characteristics of freight is very important.

If the product class is inaccurate, you risk paying too much. Also, you violate transportation law which leads to hefty fines if caught trying to pay a cheaper rate.

Looking for easy LTL shipping? Get a free freight quote right now!

 

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