"Great American Trucker Giveaway" - Ends Sunday 6/2/24. Enter Now for Chance to Win!
Blog
Shippers

What is LTL Freight Shipping and How LTL Shipping Rates Are Calculated

By
Brian Smith
May 16, 2024
16 min
Share this post
What is LTL Freight Shipping and How LTL Shipping Rates Are Calculated
JOIN OUR NEWSLETTER
Discover tips, trick, and tools to grow your logistics business faster than ever!
Sounds good - Sign me up

Table of Contents

LTL shipping is one of the most widely-used forms of shipment, and for good reason. It can provide shippers with cost-saving advantages, flexibility with product demands, and reduce warehouse expenses. That said, if you're a shipper trying to find budget-friendly ways to ship smaller loads, then you're in the right place. Less-Than-Truckload (LTL) freight shipping is a helpful option that works well for businesses no matter the size. Shipping LTL freight can be approached as shared transportation. In this guide, we'll go over everything involved with LTL freight shipments, including how to save more with Cota Systems™. Consider this your crash course on the complexities of calculating LTL freight shipping rates. Keep reading to learn more!

what is ltl freight shipping

What Does LTL Mean in Trucking?

Less-Than-Truckload shipping in trucking means that you're shipping a certain quantity of goods that's more than individual packages, but less than a full truckload. LTL trucks offer that sweet spot for shippers who need a cost-effective option. 

How LTL Freight Compares to FTL Shipping

FTL (Full Truckload) shipping offers quicker delivery, but this often comes with a higher price tag. This is due to its exclusive use of a full truck. 

LTL (Less Than Truckload) shipping is the ideal choice for shippers who are looking to save money while being adaptable, offering a strategic trade-off, even if it means slightly longer transit times.

Industries That Commonly Use LTL Freight

LTL freight shipping is the go-to for many industries searching for flexible shipping solutions. Retailers use the option of shipping Less Than Truckload because it can handle different shipment sizes, meeting the needs of the various products they sell. But they're not the only industry that benefits from LTL. Manufacturers save money on reduced warehousing costs and LTL shipping allows them to distribute parts more efficiently. E-commers businesses like using LTL because it's good for managing many smaller shipments, which makes their supply chain work more efficiently. Additionally, automotive companies use LTL to ship spare parts and components. This allows their logistics to flow more smoothly. 

The Pros and Cons of LTL Shipping

Although it's true that LTL freight shipping can save on costs and aligns with environmental concerns, businesses need to carefully consider these benefits with the potential drawbacks. Take a look at the pros and cons below:

Pros and Cons of LTL Freight Shipping

Pros: Cost Efficiency

Shared Shipping Costs

LTL shipments shine when it comes to shared shipping costs. It allows businesses to split the costs of transportation with other shippers, taking advantage of volume discounts. Here, shippers only pay for the space that their goods take up, cutting costs compared to FTL shipments. 

Reduced Warehousing Expenses

Shipping freight LTL also reduces warehouse expenses. This allows leverage of just-in-time inventory practices. Frequent smaller shipments reduce the amount of time products spend in the warehouse, which cuts down on overhead. 

LTL allows transportation expenses to be streamlined, while providing the advantage of minimizing storage durations. 

Pros: Flexibility

Variable Shipment Sizes

Another advantage of less than a truckload shipping is that it allows businesses to ship different quantities of products to meet diverse customer demands. Adaptability is especially helpful for changing shipment sizes according to the seasons, which ensures the shipper makes the best use of resources.

Suitable for Small to Medium Businesses

Shipping with LTL trucks is a perfect fit for small to medium businesses, as it offers a cost-effective approach. This gives them the power to compete with larger businesses. Since LTL handles various shipment sizes, it helps businesses grow by not having to commit to and pay for full truckloads.

Pros: Environmental Impact

Reduced Carbon Footprint

Combining shipments with freight LTL minimizes the number of trucks on the road while lowering overall emissions. LTL carriers also embrace eco-friendly technologies and practices, such as paperless operations, to lower their impact on the environment.

Optimal Resource Utilization

A key environmental benefit with LTL carriers is the ability to strategically plan routes, which maximizes efficiency. This results in lowering fuel consumption and environmental impact. Examples of this include fuel-efficient fleets and route optimization software. They contribute to the optimal use of resources in the shipping process.

Cons: Longer Transit Times

Increased Stops

LTL freight shipments often mean more stops to deliver goods to different destinations, which adds up to longer transit times. Each stop requires handling, which further extends the overall timeline of delivery.

Potential Delays

With an LTL shipment, a longer transit time can increase the risk of external factors. Things such as traffic congestion and adverse weather conditions can cause delays. Coordinating multiple stops becomes more challenging, which leads to the possibility of delays in delivery schedules.

How Cota Systems™ Solves this Con:

We offer smart solutions for tracking shipments using our Cota Systems™ Mobile App that provides you, the shipper, with direct communication with your LTL freight carrier. Stay up to date on transit times with our internally vetted Cota Systems™ carriers via our platform.

ltl freight shipments with Cota Systems

Cons: Risk of Damage

Multiple Handling Points

Another con with an LTL shipment is that they pass through various loading and unloading stages, increasing the risk of damage. In fact, it's out of the shipper's hands, as they've got limited control over how their goods are handled at each stop. This leads to concerns about the condition upon arriving at the delivery destination.

Limited Packaging Control

Shippers may have limited influence over packaging conditions at intermediate stops. Handling practices with different freight LTL carriers and facilities can impact package safety. This creates uncertainties about the level of protection products receive throughout the shipping process. 

How Cota Systems™ Solves this Con

The less handling time your shipment gets the better - that's why our LTL loads are carefully scheduled so that the last to drop off is the first to load into the truck. This ensures that your shipment only gets handled when it's loaded and unloaded - avoiding unnecessary movement.

Cons: Pricing Complexity

Rate Determinants

LTL freight rates are often determined by the space your LTL shipment takes up, making it tricky to calculate costs. LTL carriers use freight classes to categorize shipments. This influences pricing based on the types of goods being transported. These factors can make it difficult for shippers who want clear and straightforward pricing. 

Additional Accessorial Charges

Pricing for LTL includes additional accessorial charges. This is where carriers may impose fees for services like liftgate usage, inside delivery, or residential delivery. Shippers could face surprise fees, making the overall cost of LTL shipments even more complicated. In order to figure out the costs accurately, businesses using LTL freight services need to be careful and understand the details.

How Cota Systems™ Solves this Con:

Transparency is key at Cota Systems™ - our guaranteed freight quotes are just that - guaranteed. 

How LTL Shipping Rates Are Calculated

LTL Shipping Rates

The cost of LTL shipping is influenced by several key factors. To understand LTL pricing, you must consider elements such as freight classes and other additional charges. In our guide to LTL freight quotes, we explain these factors to streamline the process. Take a closer look at the factors affecting it below:

Freight Classification

LTL shipments are sorted into different classes by the National Motor Freight Traffic Association (NMFTA). Lower classes (showing higher density, easier handling, and less risk) usually have cheaper rates, while higher classes (indicating lower density, harder handling, and more risk) tend to cost more.

What are the Classes of LTL?

There are 18 different classes in LTL trucking. They include 50, 55, 60, 65, 70, 77.5, 85, 92.5, 100, 110, 125, 150, 175, 200, 250, 300, 400 and 500. Factors like weight, size, and handling complexity are the basis of determining cost of LTL shipments.

ltl shipping classes

Base Rates

Each carrier establishes its own LTL rates. These are considered base rates which vary significantly between carriers. The cost of LTL shipping is calculated per hundred pounds (CWT) and is affected by freight classification and shipping distance. Additionally, base rates include accessorial charges like using a liftgate. 

Liftgates and Accessorials:

Carriers oftentimes charge extra for the use of liftgates. This is due to the extra equipment and manpower required. 

Differences in Laws/Practices for Residential and Commercial Locations

Residential Pickup/Delivery: Local regulations, limited access, and tight spaces can affect residential deliveries. These areas may have time or noise restrictions that must be followed as well when picking up or dropping off.

Commercial Pickup/Delivery: At commercial locations, loading docks handle freight efficiently, which can lower the cost of accessorials and shipping. During the loading/unloading process, local laws and regulations focus on traffic management and safety.

Accessorials: In general, accessorials refer to additional services that go beyond standard LTL shipping. This is important to understand in order to accurately budget. Some common accessorials include:

  • Inside Pickup/Delivery: If the driver must enter a building for pickup or delivery, additional charges may apply.
  • Notification Services: Carriers may offer delivery or tracking updates, which may have extra fees.
  • Redelivery Charges: For unsuccessful delivery attempts, carriers may charge the shipper for any attempts to redeliver.
  • Limited Access Fees: Some locations, such as construction sites, are considered limited access and extra charges are possible.
  • Appointment Services: If you opt for specific delivery or pickup times, it can come with additional fees.

To figure out these costs, you must look closely at how each carrier sets their prices to understand how additional services affect the overall shipping costs.

Weight of the Shipment

LTL freight shipping rates are typically tiered and work like this: the heavier your shipment, the less you pay for each pound. This way, it's more affordable for bigger loads. 

Dimensional Weight

When it comes to shipping LTL freight, certain carriers factor in dimensional weight. This is especially true for lighter, bulkier packages. Dimensional weight is calculated by multiplying the length, width, and height of the package and dividing it by a dimensional factor. This helps make sure the shipping cost accounts for how much space a package takes up, not just how heavy it is. This is especially important for bigger items that don't weigh a lot.

Distance

As a shipper, it's important to know how far your goods will be transported and how distance affects shipping costs. This involves recognizing the difference between short-haul and long-haul LTL freight rates. For LTL trucking, short-haul shipments are usually around 100 to 300 miles from where they start. They can cost more for each mile traveled. Long-haul shipments, on the other hand, go for longer distances. The total cost is generally higher, but the cost per mile is less. 

It's also a good idea to familiarize yourself with some of the trucker lingo related to distance:

  • OTR (Over the Road): Long-distance trucking.
  • PC (Point-to-Point): Direct route with no extra stops.
  • Miles Out: The distance a truck is from a destination.
  • LOA (Length Overall): Total length of the truck and trailer.
  • Hub Miles: Miles are calculated between transportation hubs.
  • ETA (Estimated Time of Arrival): Predicted time the truck will reach its destination.
  • EOD (End of Day): The time a driver expects to finish their workday.
  • P&D (Pickup and Delivery): Local hauling, covering short distances for multiple pickups and deliveries.
  • ICC (Interstate Commerce Commission): Used to regulate interstate trucking in the past.
  • Bobtail: Driving a truck without a trailer, often done when returning from a delivery.

By learning these terms, shippers are able to make clearer communication simpler with trucking professionals (carriers).

Fuel Surcharges

Fuel surcharges are extra costs added to LTL rates. They're usually calculated as a percentage of the base LTL freight rate. For example, an LTL trucking carrier could charge a 5% fuel surcharge to the base rate. These charges go up or down based on changing fuel prices and are added to the shipping cost. Additionally, these prices can change weekly or monthly, all depending on the carrier's policy. For packages sent internationally, fuel surcharge practices may change based on global price trends and any specific rules in different regions. As a shipper, it's important to keep a close eye on global fuel prices as they might affect your total shipping costs.

Freight All Kinds (FAK)

Freight All Kinds (FAK) agreements provide shippers with flexibility to ship different items, each belonging to different freight classes. FAK can potentially lower the cost of LTL shipping by allowing shippers to negotiate a single, better rate for shipping different items together. This approach makes it easier to handle bills and may reduce overall costs, helping shippers whose goods would usually cost more to ship. 

To obtain a Freight All Kinds (FAK) agreement, shippers negotiate with an LTL carrier or a freight broker. To help the negotiation process, they should share details such as how much they ship, how often, and the variety of freight classes (different types of goods) they send. 

As a rule of thumb, the more a shipper ships regularly, showing patterns and volume, the better the FAK rate the shipper might get. This way of managing freight helps make things simpler and can save money for businesses engaged in diverse shipping.

At Cota Systems™, FAK isn't just an additional service, it's our bread and butter. We offer a strategic advantage that drives both shippers and carriers into opportunities for not only enhanced efficiency, but higher earnings as well.

Opportunities for Carriers:

All of our loads are classified as FAK. This helps our carriers by more than just transporting goods. It's a pathway to maximize earnings. We ensure that their trailers are filled with diverse, money-making loads. Not only does this boost the bottom line for carriers, but it also allows for a smoother shipping process, making it more lucrative for independent trucking businesses. 

FAK isn't just a cost-saving tool for shippers. It allows the opportunity to increase the income of our valued drivers. FAK is flexible and allows them to transport various goods, all covered by a single rate. Simplified billing that covers every mile, thus contributing to their income.

Profits with LoadBoost:

LoadBoost is a live board that redefines how independent trucking carriers manage trips. This is more than just a load board. It's a gateway to seizing high-paying loads and maximizing profit margins.

6 Tips for Reducing LTL Shipping Costs

1. Use a TMS (Transportation Management System)

Using a Transportation Management System (TMS) like our FreightPro™ System helps shippers find the cheapest shipping options and the best routes. As a shipping management software, FreightPro™ makes shipping LTL freight for shippers easier and more efficient. It lowers the cost of LTL shipping to ensure transparent shipments while getting rid of surprise re-rates. Our TMS uses advanced tracking and monitoring software to make sure deliveries are secure and on-time. By lowering costs through direct shipments, combining loads, and competitive rate negotiation with independent carriers, businesses can retain more profits and reinvest it into their growth.

2. Increase Lead Times

Lead time is the amount of time it takes a shipment to reach the destination from its origin point. Proper planning and shipping ahead can help shippers avoid costly LTL shipping rates and shorten lead time.

Here are some ideas to increase lead time before shipments: 

  • Ask customers to place orders ahead of time before their required delivery date. 
  • Use advanced forecasting tools to plan for any demand fluctuations.
  • Keep extra stock of critical items to cushion against any unexpected demand spikes or if there are problems in the supply chain.
  • Combine smaller shipments into fewer, larger shipments to save money and increase efficiency.

3. Negotiate FAK Agreements for Frequent LTL Shipments

Negotiating FAK agreements is especially helpful for businesses with diverse product lines that are shipping less than truckload. By talking to carriers about an FAK agreement on your total volume of shipments, your company can get volume discounts and make administrative tasks easier. On our Cota Systems™ app, you can find FAK LTL rates for all carriers. For guaranteed freight quotes and an awesome shipping experience, rely on Cota Systems™. With features like no re-rates, direct shipments, and constant support, we're making shipping easier and more affordable, as many happy shippers have experienced.

using a TMS to reduce LTL freight cost

4. Opt for Backhaul Opportunities

Backhaul in logistics, especially in LTL trucking, means bringing cargo or freight back from point B to where it started or point A. Oftentimes, this comes with reduced LTL freight rates, as carriers want backhaul loads to fill their return trips. 

How to find more backhaul opportunities:

  • Talk with carriers about potential opportunities with your LTL orders.
  • Be open to changing your shipping times to accommodate backhaul possibilities.
  • Negotiate with carriers about adding backhaul terms to your shipping agreements.
  • Organize reverse freight auctions where carriers bid on your shipments and might offer backhaul options.

Deadheading - Leaving a Not-So-Friendly Impact on the Environment

Deadheading is when trucks drive back with an empty trailer after dropping off a shipment. Not only is this costly, but it also contributes substantial CO2 in the air from unnecessary empty driving. According to the U.S. Department of Transportation, the 2022 Bureau of Transportation Statistics, FTL (Full Truck Load) adds to an annual carbon emission of 252 million metric tons (277782120 U.S.). Sounding the alarm, within this total 87 million metric tons (95900969.9 U.S.) are attributed to empty miles. This places a substantial impact on the environment due to deadheading.

At Cota Systems™, we help combine loads to fill trailers and coordinate pickups from dropoff locations to help reduce the significant impact of CO2 emissions.

5. Consolidate Shipments

To get better rates on less than a truckload, consider combining smaller LTL freight into one larger consolidated freight shipping load. The goal is to use the LTL truck's space efficiently, moving closer to a full truckload (FTL) without paying the premium for exclusive use of the truck. This works best when shipments are going in the same direction or to the same region.

To find the best ways to combine shipments for savings, remember to use a TMS like our Freightpro™ System. To learn more about consolidating shipments and other strategies, check out our freight broker guide. It's a useful resource that explains the logistics behind moving goods smoothly and the role of freight brokers in the industry.

6. Utilize Regional Carriers

To lower the cost of LTL shipping, consider regional carriers for shorter routes. They may offer competitive rates for LTL trucks compared to national carriers. Regional carriers may be more flexible in tailoring agreements to meet your needs. Be sure to research carriers operating in the regions you frequently ship to or from. Check out the Cota Systems™ guide on the best load boards for more insight on finding reliable carriers and brokers. It provides helpful details from real users, so you can make informed decisions for smooth shipping.

Key Factors to Consider When Selecting an LTL Carrier

Selecting an LTL Freight Carrier

When you choose an LTL carrier through Cota Systems™, the quality of your experience is guaranteed. Choosing a CotaCarrier™ ensures faster, cheaper, and transparent delivery for your shipment than if you're shipping traditionally. Here are some important things to think about when choosing LTL carriers:

Understanding Your Shipping Needs

When determining your LTL shipping needs, consider these factors:

  • Shipment volume: Check whether you have enough items to fill a whole truck (FTL), or if it's less than a truckload.
  • Product characteristics: Think about how big and fragile your goods are to make sure it stays safe during LTL shipping.
  • Shipping frequency: Decide whether your shipments occur frequently or just every now and then to figure out the most cost-effective shipping method.
  • Cost: Compare the costs for LTL with other options like full truckload or regular parcel shipping.
  • Packaging requirements: See if your products can be packed on pallets to meet LTL shipment standards. (We'll touch more on that below.)

Urgency: Think about whether your shipments can wait a bit longer due to potentially longer transit times with LTL.

Carrier Reliability and Track Record

When choosing LTL carriers, consider the following:

  • On-Time Performance: Check the carrier's history of on-time deliveries, along with their safety and freight handling records.
  • Claim Handling: Check how often carriers handle claims and how they solve problems to make sure your items are kept safe.
  • Real-Time Tracking: Does the carrier have real-time tracking? This feature ensures you stay informed about your LTL freight shipments.

You should always research the carrier's standing in the logistics industry by taking a look at customer reviews and testimonials. Our trucking dispatch software allows for effortless dispatch management. Avoid paperwork hassles, enjoy one-click billing, and easily communicate with your drivers with Cota Systems™. 

Additionally, when thinking about reliability and track records, be aware of double brokering. This is a situation where a shipment is handed over to another company without the shipper's knowledge. This can happen with LTL freight shipping, check out our guide to avoid scenarios like this.

Geographic Coverage

Examine where your customers are and see if there are nearby areas to expand and work with local LTL carriers. This can get you better rates and better services because local LTL trucking carriers know the area well. If your carrier has hubs near major ports, it's beneficial for businesses doing international trade as well.

Considerations for regional vs. national carriers

National carriers that work all over the country can save you money on long-distance shipments, offer extensive coverage, and the use of advanced tech for complex logistics. This makes them suitable for businesses that have diverse shipping needs. Regional carriers, on the other hand, get your goods to nearby places with faster transit times for short to mid-range distances. This enhances customer satisfaction and proves to be cheaper for shorter trips.

Pricing and Cost Efficiency

Make sure your carrier offers clear and simple pricing. By understanding how the carrier calculates cost, including any discounts, you can figure out if it's cost-effective for you. Check if they offer volume discounts or FAK agreements for their LTL shipping rates. See if they're willing to negotiate their rates based on your needs. It's wise to compare rates from multiple LTL carriers. With Cota Systems™ TMS, the prices you see are final. We never re-rate and as mentioned above, all our combined loads are FAK.

Technology and Tracking Capabilities

Real-time tracking enhances visibility. This will help you manage potential delays in a proactive way. Choose LTL carriers that integrate with your existing systems like order management, inventory control, or warehouse management. Be sure to choose carriers that offer mobile accessibility for real-time updates, especially if your business is on-the-go. When you book a carrier for shipping LTL freight with Cota Systems™, you can easily access and track important information. Get started today.

Customer Service and Support

For a smooth LTL shipping experience, effective customer service is necessary. When selecting LTL carriers, go for those you can easily reach via phone, email, or online chat. Evaluate how well they handle problems like delivery delays or damage. Our website makes it easy for carriers and shippers to communicate. The Cota Systems™ team is here to help ensure a seamless LTL shipping process.

How to Accurately Measure Your LTL Shipment

Of course, the first step in understanding LTL freight and shipments is by reading our guide above carefully. Then, take a look at the steps we've provided below to help shippers accurately measure the size of their LTL shipment. By following these tips, your LTL shipments will not only be cost-effective, but will accurately reflect the dimensions and weight of your goods.

ltl freight shipments

Accurate Weight Measurement

Use a reliable, industrial-grade scale to weigh each item. Don't forget to include the weight of the packaging material. Precise weight helps you to avoid any additional LTL shipping charges during transportation.

Dimension Measurements

Consistent Unit of Measurement: Some carriers calculate shipping costs based on dimensional weight rather than actual weight. Learn these calculations and use them to your advantage.

Accurate Measurements: Measure the length, width, and height of each LTL shipment package. If your item is non-rectangular, be sure to measure the longest, widest, and tallest point. To avoid underestimating space requirements, round up to the nearest inch.

Freight Class Determination

When shipping LTL, keep in mind the freight classification we've outlined above. Weight and dimensions play a significant role here. Misclassification can lead to delays and additional charges.

Packaging and Crating

As mentioned above, packaging standards must be met as it affects the cost of LTL shipping. To protect your freight and ensure it doesn't damage other shipments, pallets must be sturdy and in good condition. Shippers must also make sure the freight is secure and balanced.

Bill of Lading (BOL)

BOL (Bill of Lading) has a dual purpose as it serves as both a receipt and a legal contract between the shipper and the carrier. You must accurately complete the BOL for LTL freight shipments. It must include the weight, freight class, and a description of the goods.

less-than-truckload shipping bill of lading (bol)

Choose the Right Carrier

Our step-by-step guide is tailored to help you in choosing the right LTL carriers for your goods. Keep in mind that at Cota Systems™, vetting is effortless as we handle it all for you. This ensures that shippers are covered in care of any unlikely errors. As mentioned above, we never re-rate, so you can rest easy and know that any potential losses due to additional fees are absorbed by Cota Systems™. 

Be Aware of Additional Services

Shipping software apps, like the Cota Systems™ app, can help shippers attain the most accurate measurements and weight calculations to reduce the chances of errors. If you're not using Cota Systems™, this can be detrimental to your LTL freight rates. As mentioned above, services such as liftgate, inside delivery, or limited access to delivery areas may result in additional charges. When getting a quote, be clear about what you need to get the best quote.

Tracking and Visibility

Tracking tools provided by the carrier provide visibility throughout your LTL shipping journey. With Cota Systems™, communication is simplified. It allows you to have easy contact, so you can get in touch with your carrier when needed.

Additional Tips to Consider

It's important to always stay informed on industry changes. Like anything else, LTL shipping practices can evolve. However, this isn't an issue at Cota Systems™ as our system adapts to the changes within the industry. Cota Systems™ isn't biased towards shippers, LTL carriers, or brokers. Our mission is a fair and lucrative business for all. However, if you're looking for freight shipping outside of Cota Systems™, be sure to periodically assess your shipping process and carrier performance to seek out any areas of improvement. And, if you're new to LTL shipping or facing any difficulties, be sure to consult a logistics expert or freight broker. Our trucking experts at Cota Systems™ are always happy to help. Be sure to reach out with any questions.

Parting Words

Remember that adapting to shipping strategies is how to make the most of freight LTL efficiency and it's an ongoing process. The flexibility of LTL services proves to be beneficial for small to medium-sized businesses that handle different size shipments. Of course, always explore innovative ways to use LTL to your shipping advantage in a way that works well for your business. This will ensure that shipping remains adaptable and tailored to the unique needs of your business. Happy shipping!

Have a little time on your hands? Be sure to check out our blog on different truck types.

Join Our Newsletter

Discover tips, trick, and tools to grow your business faster than ever! Plus - exclusive giveaways, discounts, and new feature releases.