Understanding less-than-truckload freight rates can be confusing, unlike truckload-rates which can be determined solely by a per mile rate or price per hundredweight. Many factors can regulate LTL rates which will impact the cost of a shipment. Companies that provide delivery truck rental need to take these 8 factors that determine the rates of LTL shipping into account:
- Weight: As the weight of shipments increases, the less you pay per 45 kilogrammes. When the weight of the LTL delivery rises and approaches the lowest weight in the next heaviest weight group, it will be categorised as the lowest weight and rate in that weight group.
- Density: The correct calculation of a shipment
's density allows shippers to accurately describe their goods on the bill of lading.
When calculating the dimensions of your shipment, be sure to measure the longest sides; including any packaging, overhangs, or protrusions. Once the density is determined, you can then identify the class.
- Classification of Freight: Every piece of freight is classified in the LTL industry, and classification is a huge factor in making up LTL rates. Factors that determine the class include; product density, value, stow-ability, handling, and liability. Lower classes include dense freight that is hard to damage and is easy to handle. Conversely, higher classes are made up of lighter/less dense freight that typically occupies more space. The higher the class, the higher the rate will be.
- Distance: Commonly, the longer the journey, the higher the rate per hundredweight will be. Many LTL service providers only cover a particular geographic region so you must consider the amount of postcodes a carrier serves directly. If a shipment is delivered to a location outside a carrier's normal service area, the delivery truck rental company will transfer the shipment to another LTL carrier for final delivery. This is called interlining, a practice that may lead to higher costs due to lower discounts and higher minimum charges.
- Base Rates: All LTL carriers set their own base rates. These rates are quoted per 45 kilogrammes, and they will vary according to the carrier and the lane. They are based on the freight classification. One notable point is that carriers will modify their base rate according to their need for extra volume and raise gross costs for lanes where they have a good balance between trucks and freight.
- Minimums: Of the LTL rates, the absolute minimum charge (AMC) is the price which increases the fastest. This minimum charge refers to the charge below which a carrier simply will choose not to operate. Carriers would prefer a 2-3% increase on contract rates, but RM20 increases in the minimum charge. If the minimum charge is RM300, a RM20 increase equates to a 6% increase. Carriers prefer this because the costs a carrier experiences for a minimum charge shipment are greater than the costs they experience for heavier shipments.
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