Shipping Insurance Unit-3 III YEAR

UNIT – 3 DETERMINATION OF FREIGHT

Freight shipping – An Overview

While shipping products across the globe, it is very common to commit
mistakes. Sometimes you may miscalculate package weight or even the
shipping carrier you have chosen may not be the best suited for the job. These
small mistakes may cost a little while shipping common products. But this is
not the case with Freight.

While shipping normal products may or may not be a risky job, but when it
comes to freight shipping, things need to be perfect. With bigger shipments,
even things like shipping carriers, shipping service, and even the mode of
transportation can cause serious trouble.

Freight shipping comprises transporting cargo, goods, and commodities in bulk

by the means of air, land or water transport. In other words, freight can be
defined as the goods shipped by truck, train, ships or planes. Freight shipping is
mostly carried out using trucks, railroad cars and large ships that can carry
huge containers.

Freight Shipping

Definition:
Freight shipping is the process of transporting commodities, goods and cargo
by land, sea or air. Common types of freight shipping over the road include
truckload, less than truckload (LTL) and intermodal.

Freight itself can be defined as the goods transported by truck, train, ship or
plane.

The means of transport commonly associated with freight shipping are trucks,
railroad cars and large ships carrying containers.

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 Shipping Insurance Unit-3 III YEAR

How is Freight shipping different from normal shipping?

Normally parcel shipping is associated with the products that are smaller in
size and quantity. In most of the cases, the shipments are allowed to contain
products weighing up to 150 lbs. But this is not the case with freight. Freight
shipping involves shipments that weigh more than 150 lbs.

Apart from the weight differences, there are also other things that vary in
freight shipping.

Classification of Freight products

Freight shipments are considered to help avoid the shipping rates confusion
among consumers and carriers. It is a standardized method which has helped
to generate a uniform pricing structure for freight shipping. There are about 18
different freight classes based on package weight, density, and value. The
freight class number lies between 50 and 500.

Benefits of Freight Shipping

Freight shipping is key for getting goods to a destination on time, safely and in
a cost-effective manner. Whether shipping by land, sea or air, there are a
number of benefits to consider:

1. Top carriers: When shipping important freight, you want to make sure
your goods arrive safely and on-time. Online freight service providers
work with high quality contract carriers.
2. Save on shipping costs: Businesses may not have adequate time to
research carriers, get quotes and find the best rates for their freight. We
can help you find competitive rates from qualified contract carriers.
3. On time freight: When you have time sensitive freight, you may have to
get it to your customers within a tight delivery window. With the variety
of freight shipping service levels available, you can select the method
that best fits your time frame.

Modes of Freight Shipping: There are several modes of freight shipping

including less than truckload, full truckload, intermodal, partial truckload
and expedited. We have broken each of these down below:

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 Shipping Insurance Unit-3 III YEAR

1. Less than truckload: Also referred to as LTL, less than truckload is

designed for shipments larger than parcel but not large enough to
require the space of a full truckload trailer. LTL is typically used for
shipments between 150 and 15,000 pounds. Learn more about LTL.
2. Full truckload: Full truckload involves moving bulk or pallet loads that
are large enough to justify the use of an entire semi-trailer, typically
more than 15,000 pounds. Full truckload can be more cost effective
and reduce the opportunity for freight damage with less handling
than LTL. Learn more about full truckload.
3. Partial truckload: Partial truckload gives you the option to split the
cost of a truck with other shippers, often resulting in cost savings.
Partial truckload is a good option if your shipment is over 5,000
pounds or 6 pallets. Learn more about partial truckload.
4. Intermodal: Intermodal shipping typically refers to shipping with a
combination of rail and truck. However, it can involve a variety of
transportation modes including rail, trucks or ships to streamline the
shipping process. Including rail in your freight shipping can reduce
fuel use, lower costs and offer a reliable method of shipping. Learn
more about intermodal.
5. Expedited: Expedited freight refers to time-critical shipments in
which freight has to be delivered quickly. Expedited freight is most
often transported by truck or air. Learn more about expedited
freight.

Full truckload freight shipping equipment.

The equipment used to haul truckload freight may vary depending on the
commodity itself. Here are a few common types of freight shipping equipment:

1. Dry van: Dry vans are the most common type of freight trailers used by
commercial trucking companies. Dry vans are typically 48 or 53 feet in
length and typically handle no more than 45,000 pounds. Dry van
shipping is a common method for transporting dry goods. Learn more
about dry van shipping.

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2. Flatbed: Flatbed equipment is used to ship oversized, bulky or oddly

shaped freight, including machinery and lumber. Flatbed isn’t
recommended for fragile or weather-sensitive goods.
3. Temperature control: Temperature controlled shipping is the transport
of goods that are sensitive to climate conditions. Temperature
controlled, or refrigerated shipping, is typically used for perishable or
temperature sensitive goods including produce, pharmaceuticals, meat,
seafood and dairy.

Factors that determine freight shipping rates

When it comes to freight shipping, some of the most common questions
involve freight rates. While price can vary for a number of reasons, there are a
few common elements to consider:

1. Shipping method: The mode of transportation used to ship the freight is

a weighing factor. For example, expedited shipping will usually result in
additional charges.
2. Origin and destination: The further the distance between the shipping
origin and the final destination, the higher the rate will be. Proximity to a
major metro can also impact freight shipping rates.
3. Size and weight: The dimensions and weight of the shipment are key to
determining freight rates. The length and width should be rounded up to
the next inch while accurate weight measurements are key to rates and
for carriers to meet DOT regulations.
4. Special services: Any shipments that require special handling
(perishables, fragile, hazardous materials) will likely lead to higher costs.

Common freight shipping questions

We know there are many factors to consider when shipping freight. We’ve
included a few of the most common questions below:

1. What can be shipped via freight? Just about anything! Many carriers
specialize in certain types of goods or shipping and the various modes of
freight shipping ensure your cargo can arrive when and where you need
it.

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2. What type of freight solution do I need? To determine which shipping

solution meets your needs, a number of factors need to be considered.
Our dedicated experts can help find the right solution for you.
3. What’s the difference between parcel and freight? Parcel shipping
refers to small, lightweight and individual shipments typically handled by
common carriers. Most parcel shipments are limited to 150 pounds.
4. What is freight classification? Freight classification is a standardized
method designed to give consumers and carriers a uniform pricing
structure when shipping freight. Freight class is based on weight, density
and value. Class numbers are between 50 and 500.
5. Should I use a freight delivery service? Freight service providers sell
freight services without owning transportation equipment. They help
find reliable contract carriers, negotiate competitive rates and help
manage the process for you each step of the way. If your business
doesn’t have the time or resources to shop around for the best carrier, a
freight delivery services can be helpful.
 Factors affecting Freight Shipping Rates

Below are some of the factors that affect shipping rates when it comes to
freight shipping.

1. Weight of the shipment

2. Density of the shipment
3. Distance between source and destination
4. Freight Classification
5. Shipping Mode
6. Fuel Cost
7. Tariff rates and Negotiated Rates

Now, we will discuss each factor in detail as for how each one of them
affects the cost of freight shipment.

1. Weight of the Shipments

Be it standard shipping or freight shipping, the weight of the shipment is

among the most important factors affecting the shipping rates. But in case
of the freight shipping, there seems to be a slight change in the way weight

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affects shipping rates. Freight rates tend to be cheaper when it comes to

shipping price per 100 lbs. The reason behind this is that the pre-defined
freight groups.

As the weight of the shipment increases, it tends to move to the next

shipment group. Once in the next shipment group, the weight is considered
in the lowest weight category in that particular group. Hence, the weight is
matched with the corresponding shipping rates of that particular group.

Moreover, there is one more reason the weight of the shipment is among
the top factors that affect the shipping rates. Weight, along with the
density, helps to identify the freight class. Hence, becoming the deciding
factor when it comes to shipping rates.

2. Density of the Shipments

Before we talk about how the density of the shipment affects the shipping
rates, first let’s talk about how to calculate the density. Ideally, to calculate
the density, you need to divide the total weight of the shipment with the
per cubic feet (cu. ft.). However, in the case of pallets, use the dimensions
of the pallet, the total height of the pallet with the carton and the weight of
the pallet to calculate the density.

After calculating the density, you can determine the freight class for your
packages. This will determine the shipping rates for your shipment.
Moreover, the density of the shipment also allows the carriers to pinpoint
the space that the shipment will occupy and most importantly, how easy it
is to break. This way it will increase the shipping rates for you.

3. Distance between the source and destination

The distance between the source and the destination follows a very simple
rule – More the distance more will be the cost of shipping. However, this is
not that simple and the shipping rates may vary from place to place. This
variation is due to the fact that shipping carriers may or may not cover the
exact geographical location.

In above cases, one shipping carrier may contact another carrier to

complete the shipment. This way the carriers will eliminate the issue of

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covering shipping address. However, since the difference in the carrier,

different source and destination per carrier, and various other factors can
affect the shipping rates to a large extent.

In case of a single carrier, the source and destination’s distance from the
nearest metro city is taken into consideration. Also, different locations may
vary the capacity for shipping and may also increase the shipping rates.

4. Freight classification

As we discussed in the above sections, the freight class have a huge impact
on the freight shipping rates. Freight classes comprise of two extreme
points – Low freight classes and high freight classes. Freight classes are
defined on the basis of the weight of the shipment, density of the shipment,
handling as well as the liability of the shipment.

So based on these factors, the freight class on the lower end will have lower
shipping rates. It will include the shipments with a higher density that won’t
be prone to damage easily. As a result, the products will be easier to
handle.

On the other hand, the higher freight classes will have products with higher
shipping rates. Reason being the lesser density, shipment being too delicate
to handle and easily prone to damage. As a thumb-rule, higher the freight
class higher will be the shipping rates.

5. Shipping mode

As we discussed various shipping modes, these too affect the shipping rates
in case of freight shipping. Shipping modes only affect the time aspect of
the shipment. Once you have selected the freight class, the only thing that
counts is how urgently you want your shipment to reach the destination.

Based on the urgency, shipping mode like Expedited Freight Shipping will
result in faster but costly shipping. This is because of the additional charges
that are added when you select a much faster shipping service.

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6. Fuel Cost

It is obvious to say that the shipment cost also depends on the price of the
fuel. However, it is not as simple as it seems. Shipping carriers have no way
to compensate the increase or even decrease in the fuel charges. Hence,
the only feasible option is to pass the difference in the fuel charges over to
the consumers.

Now, in case the fuel prices go up, the shipping rates will be higher. This is
mainly done by introducing a fuel cost component among the shipping
charges. The same thing happens if the fuel charges go down. The shipping
carriers may choose to levy off the fuel cost or decrease the amount so that
the shipping rates are cheaper but still they manage to make profits.

7. Tariff rates or Negotiated rates

Working with the shipping carriers is similar in case of the parcel as well as
freight shipping. The shipping cost depends on the type of shipping rates
you get from the shipping carrier. Hence, based on whether you are going
for the tariff rates or opting for the negotiated shipping rates, your shipping
cost will vary. In such cases, the best possible option is to approach the
third party logistics (3PL).

Shipping carriers generally offer 20-25 % discount as negotiated rates, if the

company has been shipping multiple shipments to multiple locations. If not,
then opting for the logistics will easily affect the shipping cost in a positive
way. This way, they might provide you the price negotiation that you
directly won’t be able to get.

So this was some insight about the freight shipping and some of the most
important factors affecting the freight shipping rates.

 Factors affecting Freight Shipping

The following are the factors affecting ocean freight rates:

1. Intended destination: The intended destination is an important factor

when it comes to calculating ocean freight rates. In simple terms, the

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longer the journey, the exorbitant the ocean shipping rates and vice-
versa.
2. Service Charges: Any extra charge levied by port authorities like the
security service charges also tends to affect the ocean freight rate.
3. Season: For certain goods, the season becomes a very important factor.
Grains and fruits transported during a particular freight season will have
higher cargo rates and vice-versa.
4. Currency: In today’s times, the common denomination used for
international transaction purposes is the dollar. Ocean freight rate
depends on the fluctuating rate of exchanges and therefore is likely to
be levied on the latest prevailing exchange rate.
5. Fines and Fees: If there is any delay in ship reaching the port because of
over-crowding, then there might be a fine imposed which affects the
ocean shipping rates.
6. Terminal Fees: The ocean freight also depends on the fees to be paid
while embarking the journey from a port and after reaching the
intended destination. These fees known as terminal fees also affect
ocean freight rate.
7. Bunker Capacity: Bunkers are containers to store the fuel. Rising fuel
prices and the latest prevailing fuel rates will affect the freight charges.
8. Container Capacity: The containers used to store the goods function on
the simple economic principle of ‘economies of scale.’ If the shipper
does not have enough goods to fill the containers to their optimum
capacity, it will affect the freight charges by way of the shipper having to
pay more in spite of lesser quantity.

Ocean shipping rates are generally pre-set and are standardised. But
frequent shippers can make use of client-business relationship to avail of
discounts and waivers. In a similar manner, shippers who use chartered
vessels to transport their goods have to pay an amount which is settled on
the day the transporting agreement is made between both parties.

Ocean freight is a highly unpredictable area. Lately a lot of research has

been done in order to provide a better insight on the field. This will enable
shippers to carry out their transporting of goods in a better and simpler
manner.

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Key Factors that Influence Freight Costs

If your business involves inventory – whether you are a wholesaler,
manufacturer or retailer – freight charges are one of the key costs of doing
business. Transportation costs are often highly uncertain; a merchant may
not know the freight cost for a shipment until the carrier sends an invoice
weeks later. Although freight costs are often uncertain, they are not a total
mystery; as with most outgoings, they depend on a range of economic
circumstances. Let’s look at some of the factors that affect transportation
costs.

1. Fuel costs: The cost of maritime and land transport is, of course,
related to the price of fuel. As fuel prices fall, container ships and
cargo trucks become cheaper to operate and the price of transport
goes down. Savings (or losses) are passed on to consumers – either
indirectly or through a fuel cost component built into a carrier’s
pricing model. And of course, if fuel prices increase, carriers will pass
the additional expense on to merchants.
2. The labor market for commercial drivers: Increasing wages and
competition among carriers for truck drivers can have an upward
impact on transportation costs. As older drivers retire, carriers may
struggle to find operators for their vehicles. Recruiting new drivers is
difficult; the job can be tough and typically requires a different class
of driver license (courses to certify new commercial drivers can take
weeks or even months to complete). Moreover, many logistics
companies struggle to compete with ‘in-house’ truck driving positions
that tend to pay better and may offer less stress.
3. Demand for freight: Pricing depends on the volume of product being
shipped by operators just as much as it depends on the actual,
underlying costs. If capacity is limited, operators may be inclined to
sell limited space at a premium. On the other hand, if business is
slow, a carrier may be talked into offering a more competitive rate, at
least in the short term.
4. Customer loyalty: Merchants who can offer a carrier regular,
consistent business is well placed to receive a preferential rate,
especially if demand across the industry is low.

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5. Vehicle capacity: Some trucking companies operate an older, smaller

fleet. While these trucks are entirely adequate, newer trucks are
designed to maximize storage space, allowing a truck to split space
even further.
6. Government regulation: Regulation may directly impact the freight
industry and its bottom line; for example, governments often set
maximum driving hours for commercial operators. Other government
regulation may also impact freight costs; for example, New Zealand’s
Emissions Trading Scheme has been estimated to increase freight
costs by several dollars for every thousand kilometers travelled.
7. Geopolitical events: International maritime shipping has become
fraught with the dangers of pirates and rogue governments. The
World Bank estimates that the losses from global piracy amounted to
approximately USD$18 billion in 2014, pushing up the price of
everyday freight as carriers were forced to change shipping routes
and pay higher insurance premiums.
8. Your reputation as a merchant: The price quoted by a carrier will, at
least in part, reflect the carrier’s expectations as to the packing of
pallets and the time to load. If you have a reputation for loading
quickly, you may be charged a slightly smaller rate to compensate.

Freight Rate
A freight rate (historically and in ship chartering simply freight) is a price at
which a certain cargo is delivered from one point to another. The price
depends on the form of the cargo, the mode of transport (truck, ship, train,
and aircraft), the weight of the cargo, and the distance to the delivery
destination. Many shipping services, especially air carriers, use dimensional
weight for calculating the price, which takes into account both weight and
volume of the cargo.

Why Choose Sea Freight Over Other Shipping Methods?

1. Capacity and Value – One container can hold 10,000 beer bottles! And
ocean freight is cheaper. As a rule of thumb, any shipment weighing
more than 500 kg is too expensive for air freight. For light shipments,
use this chargeable weight calculator to work out whether your
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shipment will be charged by actual weight or dimensional weight. For

live international shipping rates see our FBX index.
2. Fewer restrictions – International law, national law, carrier organization
regulations and individual carrier regulations all play their part in
defining and restricting what goods are considered dangerous for
transport. Generally, more products restricted as air cargo than ocean
freight, including: gases (e.g. lamp bulbs), all things flammable (e.g.
perfume, Samsung Galaxy Note 7), toxic or corrosive items (e.g.
batteries), magnetic substances (e.g. speakers), oxidizers and
biochemical products (e.g. chemical medicines), and public health risks
(e.g. untanned hides). For further information check out the Hazardous
Material Table.
3. Emissions – CO2 freight emissions from ocean freight is minuscule
compared with air freight. For example, according to this research, 2
tons shipped for 5,000 kilometers by ocean freight will lead to 150 kg of
CO2 emissions, compared to 6,605 kg of CO2 emissions by air freight.

What Are The Downsides Of Ocean Freight?

1. Speed – Airplanes are about 30 times faster than ocean liners; passenger
jets cruise at 575 mph, while slow-steaming ocean liners move at 16-18
mph. No surprise then, that a shipment going by air freight from China
to the US usually takes at least 20 days more than by ocean freight.
2. Reliability – Port congestion, customs delays, and bad weather
conditions generally add much more days to ocean freight than air
freight. To date, there has been more take up of tracking technology in
air freight than ocean freight. That means that ocean freight is more
likely to get misplaced than air freight. This is especially true when the
ocean shipment is less than a container load. That said, ocean freight is
slowly becoming more reliable, in order to compete with air freight.
3. Protection – Ocean freight is more likely to get damaged or destroyed
than air cargo. That’s because it is in transit a lot longer, and because
ships are more subject to movement. But don’t worry too much about
ocean cargo falling off ships. The urban myth says 10,000 lost per year,
but it’s more like 546 of the 120 million container movements per year
that fall in the drink. Even less likely is piracy. Hotspots in recent years

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have included the Horn of Africa, the Gulf of Guinea, and the Malacca
Straits. For more information about ocean freight and sea freight
insurance, check out our page about cargo insurance.

Ocean Freight Services: LCL and FCL

Ocean and sea freight break down to two further options: a full container load
(FCL) and a less than container load (LCL). With LCL, several shipments are
packed into one container. This means more work for the forwarder, there’s
extra paperwork involved, as well as the physical work of consolidating various
shipments into a container before the main transit and de-consolidating the
shipments at the other end.

This gives LCL three disadvantages:

1. LCL takes more time to deliver than an FCL shipment. The Freightos
Freight Team typically recommends allowing an extra one or two weeks,
2. There is an increased risk of damage, misplacement, and loss with LCL.
3. LCL costs more per cubic meter. In the Freightos Freight Team’s
experience, the main transit cost is roughly double the per cubic meter
charge as for FCL.

Since shipping rates are lower for FCL, it may be worth using a full container
once your shipment is large enough, even if your goods do not fill a full
container. The tipping point for upgrading from LCL to FCL (the smallest sized
container is 20 footer) is somewhere around 15 cubic meters.

Freight rates are simply the price at which a certain cargo is delivered from one
point to another. Traditionally that where the simplicity ends, as the
calculations involved in producing these prices can depend on the mode of
transport (road freight, air freight or sea freight), the nature and form of the
cargo (Loose cargo, containerised cargo etc.) the weight or volume of the
cargo, and the distance to the delivery destination.

However to give you an idea of how shipping freight rates are built up and
calculated, we have put together a guide explaining shipping freight rates
across the different modes. We will also cover Air freight rates, road freight

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rates and courier rates in future articles, but will begin with sea freight
services.

The two main elements to the cost of transporting goods by sea are:

 The sea freight charges set by the carrier,

 Costs associated with handling and clearing the goods at the ports of
loading and discharge.

Another factor that affects the cost of containerised sea freight, is whether the
goods require a dedicated full container (FCL) or can be consolidated with
other cargo (LCL). Let’s break down both below:

FCL (Full Container Load)

FCL is the abbreviation for a “Full Container Load“. And the term is pretty self-
explanatory. The shipping line charges a flat fee per 20′ container, 40′
container or 40′ High cube container, and the amount is dependent on many
factors including origin, destination, volume, time of year, plus many other
variables. Unless you have a contract with the shipping line or are moving
significant volume, you will usually get a more favorable deal from a freight
forwarder, who will likely have access (directly or indirectly) to a discounted
rate based on certain volume agreements.

LCL (Less than Container Load)

When you do not have enough cargo to fill a shipping container (also known as
group age shipping), LCL is usually a very viable option. Specialist LCL sea
freight consolidators run services to all of the major ports and gateways
around the world. They do this by paying for a full container from the shipping
line, consolidating multiple smaller shipments at their warehouse, loading and
shipping the full container in the usual manner and then earning their profit by
charging a pro rata rate per 1000 kgs or 1 Cubic Meter (whichever is greater),
known as weight or measure (w/m).

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FCL or LCL?

There are some instances where a shipper will not want to share a container
even if LCL is cheaper, but for most the decision of which option to choose
comes down to cost.

How to calculate freight rates ?

Sea Freight rates are normally provided in the form of a Freight quotation and
the format of these quotations can vary from freight forwarder to freight
forwarder and sea Freight Company to sea Freight Company. Whilst new
surcharges seem to be introduced daily, your sea freight price will most likely
be made up of the below freight & surcharge items.

Name Description FCL Charge Type LCL Charge Type

Inland Haulage Haulage from Lump-Sum can Lump-Sum can
shipper to export include OR be include OR be
warehouse or port of subject to Fuel subject to Fuel
exit. surcharge surcharge
UK THC Terminal handling Lump Sum Weight or Measure
charge – container (W/M) Usually based
handling at the port on per 1000 kgs or
or consolidation 1.000 M3 whichever
warehouse the greater.
Documentation Admin charge for Lump-Sum can be Lump-Sum can be
required shipping multiple items for multiple items for
documentation different different
documentation. I.e. documentation. I.e.
Shipping line Bill of Shipping line Bill of
lading / House Bill of lading / House Bill of
lading / certificates lading / certificates
of origin etc. of origin etc.
Customs Clearance Production and Lump-Sum Lump-Sum
lodging of customs
declaration.
Security Surcharge for Lump-Sum Lump-Sum
additional security
measures usually
imposed by the port.
Ocean freight Base rate for ocean Lump Sum Rates sold Weight or Measure
freight. per size unit. I.e. 20′ (W/M) Usually based
cntr = $1000 40′ cntr on per 1000 kgs or
= $2000 1.000 M3 whichever
the greater.

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BAF Bunker adjustment Lump Sum Rates Weight or Measure

factor – fuel charged per size unit. (W/M) Usually based
surcharge for the I.e. 20′ cntr = $350 on per 1000 kgs or
ocean transport 40′ cntr = $700 1.000 M3 whichever
the greater.
CAF Currency adjustment Percentage of Usually a percentage
factor – hedging of Freight Normally of the freight or
currency exchange advised as sometimes W/M.
risk percentage of freight This really comes
rate. I.e. 20′ cntr = down to how the
$1000 CAF @ 12% = freight forwarders
$120 choose to present it;
often it will be
shown as ‘inclusive’.

What is Full Truck Load Shipping (FTL)?

Full truckload can mean 2 things; either you have enough products to fill a full
truckload, or you have a partial load but you prefer a dedicated truck. Full
truckload is often chosen when businesses have 10 pallets or more to ship,
when they have high risk packages, or when time is an issue (FTL is faster).

Full truckload costs more than LTL, but it will get your shipment delivered
faster—At JBT, we’re proud to point out that our FTL pickup and delivery
arrives on schedule 99% of the time!

In contrast to LTL shipping, FTL is ideal for larger shipments whereby an entire
freight load from one business occupies the space on a semi-trailer destined to
one client.

Some benefits of FTL shipping are:

1. Security and Tracking.

2. Ideal for large shipments.
3. No load transfers—shipments remain in the same truck for the entire
length of the journey from point A to point B.
4. Best way to transport large shipments.
5. Ideal for high risk or delicate freight shipments.
6. Considerably faster than LTL; great for high consumer demand.

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What is Less than Truck Load Shipping (LTL)?

LTL is a type of ground freight transportation that combines shipments from

multiple customers. Businesses choose this budget-friendly option when the
consumer demand for their products is average or stable.

Less than truckload shipping is affordable for small business because you share
the transportation costs with other companies, and use a third-party logistics
(3PL) company. Each company takes up a portion of the truck for their goods
and only pays according to the amount of product shipped and the length of
travel.

LTL shipments often make several stops and unpack and re-pack goods. The
shipment will take longer to reach the destination but you’ll save on shipping
costs. An experienced transportation logistics company will work hard to save
you money by matching your shipments with regular scheduled shipments
heading to the same destination.

Advantages of LTL:

1. Cost effective freight transportation

2. Ideal for small businesses

LTL VS FTL, WHICH IS BETTER?

When evaluating the pros and cons of LTL vs FTL shipping, what is best
depends on your business needs and the particulars of your freight. Here are
some things you should consider when determining which shipping method
will be best for you:

1. Weight: LTL shipments typically weigh between 100- 10,000 pounds,

and so they are ideal for freight between these weights. FTL shipment,
by contrast, is ideal for larger shipments over the 10,000-pound
threshold.
LTL shipments typically ideal when your freight shipment less than
15,ooo pounds, while you should be more likely to consider FTL for
shipments more than 15,000 pounds.
2. Speed: If your shipment is time-sensitive, FTL may be the way to go.
Since FTL shipments usually pick up the deliver on the same truck, the

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delivery can be faster than LTL, which typically requires several stops at
carrier terminals.
How fast do you need your goods to arrive at their destination? Because
you are not sharing freight space with other businesses with FTL, this
method is the best choice if you are looking for a faster shipment speed.
Even if your load weight falls short of 10,000 pounds, if you need your
goods to arrive in a hurry and budget is no object, FTL is probably your
best option.
3. Cost: FTL is more expensive than LTL because you are paying to occupy
the entire freight space. If you are looking for something more cost-
effective and speed isn't a factor, LTL may be the best option.
LTL combines the freight of multiple companies. You are not only
splitting the space but also the costs with other shippers. This can be the
more efficient option when you don’t have enough freight to fill a whole
truck.
4. Fragility: Is your product fragile or high risk? When weighing LTL vs FTL,
consider that FTL is ideally suited for more fragile goods. Because goods
remain on one truck for an entire journey (without being transferred
during transport) with FTL, there is less risk of breakage or damage. If,
on the other hand, your shipment is durable, LTL may be the best option
in order to mitigate costs.
When you are shipping more fragile items, FTL may help decrease the
likelihood of damage of goods during transit since there are less
instances of loading and unloading freight.

When Should I Choose FTL or LTL?

When selecting to ship a truckload or less than truckload you will, need to
consider these things: the size of your shipment, your shipping budget, how
fast you need it delivered, and how delicate your shipment is (is it easily
damaged? Or is it temperature sensitive?) If the shipment is large, fragile,
and it needs to reach a destination quickly, then FTL is the way to go.

What about the weight for your shipment? Shipments around 100 pounds
to 10,000 pounds are usually shipped LTL. Shipments that exceed 10,000
often require a full truckload to ship out. Transportation companies can

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give you fast and accurate quotes when you have your wants, needs, and
product specs defined.

Less-Than-Truckload (LTL) rates are used for shipments that are too big to
be shipped as a parcel but too small to fill an entire truckload.

Typically, a driver starts off the day at their home terminal by loading
several LTL shipments to be delivered in the morning. Once the driver’s
trailer is empty, they will begin picking up shipments which are brought
back to the home terminal for sorting. The shipments are then line hauled
to the destination service centre for delivery the next day.

How do you calculate freight rates?

To calculate density, divide the total weight of the shipment by the total cubic
feet.

Step 1: Measure the height, width and depth of the shipment in inches.

Step 2: Multiply these numbers together to determine the cubic footage.

Step 3: Divide the total weight by the total cubic feet or use the handy
calculator tool at freightquote.com to do work for you.

Once you know the shipment density you can determine its freight class.

What determines LTL freight rates?

LTL freight rates can be a bit confusing because of their variability. While
truckload freight rates are typically calculated on a per miles rate plus a fuel
charge, there are many factors determine LTL rates, and they can significantly
impact the cost of your shipment. We will cover nine factors that influence LTL
freight costs one by one.

1. Weight: LTL 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

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heaviest weight group, it will be rated at the lowest weight category

and rate in that weight group.
2. LTL shipping rates Density: A shipment’s density is one factor that
determines LTL rates. Shippers need to know how to calculate a
shipment’s density so they can properly describe their goods on the
bill of lading. The total weight of the shipment is divided by the total
cubic feet to determine the density. If the shipment is palletized, use
the dimensions of the pallet, the combined height of the carton and
the pallet, and the total weight of the shipment. When determining
the dimensions of your shipment, be sure to measure the longest
sides including any packaging, overhangs or protrusions. Once density
is calculated, you can then figure out the class.
3. Classification of Freight: Every piece of freight has a classification
within the LTL world and classification is a big driving force to make
up LTL rates. Classes are published in the National Motor Freight
Classification (NMFC) book by National Motor Traffic Association.
NMFTA 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
make sure you check out our next blog post in this series on what
determines LTL freight class.
4. 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.
5. Base Rates: All LTL carriers establish their own base rates. These
rates are quoted per 100 pounds (aka – CWT), and will vary from

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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.
6. 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.
7. Minimums: The pricing within LTL rates 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
8. Negotiated rate tariffs with LTL carriers: You can negotiate with
several LTL carriers per your various lanes of shipping. You are not
simply relegated to a base rate. If you have analyzed and better
understand your freight data and activity per lane, you can come to
the LTL carrier and work with them to get different tariffs for
different lanes. This will allow you to make sure you are not leaving
money on the table by balancing your more unattractive lanes with
your attractive lanes giving you overall better LTL freight rates.
9. Negotiated discounts: For companies looking for relief from high
shipping costs and market volatility, a professional, third party
logistics (3PL) provider or even a large shipper can save an extra 18 to
25% off already heavily discounted LTL rates if they routinely make
multiple shipments to multiple locations and work with numerous
freight carriers. For every $100,000 in freight costs, that’s an extra

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$18,000 to $25,000 in savings. How can a 3PL lower freight costs

beyond a company’s existing discounts? By negotiating additional
discounts based on the 3PL’s or shipper’s relationship, reputation,
and volume business with established carriers.
10.Accessorial/Surcharges: 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 lifting gate service, residential pickup or delivery,
limited access locations (i.e. jails, prisons, churches, schools, and
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.

FACTORS THAT AFFECT TRUCKLOAD SHIPPING RATES

Predicting truckload shipping rates is a tricky business. Over the past several
years, rates have fluctuated by over 50%! Factors that drive such wild swings
are numerous, but they can be nailed down to a couple fundamental issues:
changes in supply and demand and fuel prices.

Let’s start with the obvious. Fuel prices impact truckload rates. As an example,
diesel prices that are $3.30 per gallon, will then translate on a typical fuel
surcharge of approximately $0.35 per mile.

Understanding and predicting the ebbs and flows of supply and demand are
much trickier. Truck demand at the highest level is impacted by our overall
economy. Strong GDP growth, inventory restocking, housing starts, and auto
production all drive the demand for truck transportation. Supply is impacted
by equipment and driver availability, as well as truck positioning in any given
market. Together, these factors create a myriad of conditions that influence
pricing. It’s no wonder predicting where these prices will go is such a challenge.

Having said all that, here are some important considerations when it comes to
your truckload shipping rates.

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1. FLEXIBILITY AND SPEED

Flexibility around pickup and delivery times is a big deal. Anything you can do
to help drivers and trucking companies plan their routes to reduce idle time
will go a long way to finding the best truck for the job. This is more and more
important today now that ELDs are driving higher levels of compliance in the
hours of service rules designed to keep our roads safe. Depending on transit
requirements, a load might require team service, which will definitely affect
pricing.

2. EFFICIENCY

One of the most common questions we get asked today is, “What can I do to
be considered a shipper of choice?” Being an attractive shipper to truck drivers
is critical to securing reliable capacity at competitive rates. Time is money for
drivers, so pay close attention to your loading and unloading time to help them
maximize their time on the road. Maybe you can support more drop trailers to
improve turnaround times.

3. HEADHAUL VERSUS BACKHAUL

Freight flows influence pricing on a lane-by-lane basis. When truck drivers are
competing to reduce empty miles, rates will be lower. When shippers are
competing to find capacity, rates will be higher. What are the chances of
getting re-loaded after delivery? What is the load-to-truck ratio at the pickup
and delivery locations? These are important factors to consider when you
select carriers to move your freight.

4. DEADHEAD MILES

Actual hauled mileage (obviously) is typically the largest determination of

rates. Deadhead miles are often an overlooked factor. What is the proximity of
the pickup or delivery location to the next load? If a driver has to go out of the
way to make a pickup, the empty miles will become a factor in your overall
rates.

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5. LOADED WEIGHT

Loaded weight is another overlooked factor in truckload rates. Many shippers

measure their transportation costs on a per-piece metric. The larger the
quantity of shipped goods, the less you will pay in shipping costs per piece.
However, it may increase truck costs as fuel and overall wear and tear are
much higher on a fully loaded truck.

6. SEASONALITY

Another big discussion item in the trucking business is, “Has produce season
started yet?” Yes, produce season starts in the spring and works its way into
early summer throughout the country. When it hits—and depending on how
hard—can drive up rates very quickly as truck supply gets squeezed. It is critical
to forecast as accurately as possible leading up to produce season. Establishing
strong relationships with year-round freight in these markets while working
with your transportation provider helps minimize the cost impact. There are
many other shipping seasons around the country as well. Christmas tree
season in the Pacific Northwest is a good example. The bottom line—you
should understand how normal seasonal trends may impact your shipping
rates.

7. DISRUPTIONS

Finally, markets get disrupted by unforeseen factors. Port strikes and

hurricanes come to mind as recent examples. Any time an unforeseen event
affects supply chains in general, shippers make adjustments and trucks are out
of position, resulting in inefficiencies that influence rates.

Determining truckload shipping rates can be challenging when you consider all
the factors that influence cost.

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