Rising shipping expenses, both international and domestic, have many small and large business owners anxious to find ways to save. Managing your shipping expenses is not a one-size-fits-all solution. Businesses must also be aware of the differences when estimating costs for a full truckload compared to a less than truckload shipment.
Key Takeaways:
Find out which factors affect freight shipping calculations and how to calculate estimates based on freight service.
When shipping goods by truck, businesses typically have two options. For one, they can arrange a full truckload (FTL), using up all the space within a trailer. Conversely, to only ship a few pallet loads at a time, there is less than truckload shipping (LTL), which allows your cargo to share space in a trailer with others.
The base costs for each of these is determined through different methods. Calculating a basic shipping rate isn’t hard, and having a mental estimate works as a guideline when negotiating. However, be aware that these will just be estimates.
The base calculation that carriers use to determine FTL works on a price-per-mile system or a flat rate. In both cases, businesses should expect to see a difference based on the trailering method.
Different trailers vary in terms of cost and rates fluctuate by region, demand, and capacity. Before calculating estimates, it’s a good idea to check averages for your area. For a quick snapshot, I’ll provide the national spot rate averages for three of the most common types of trailer services.
Typically, higher capacity (meaning carriers have more open availability) will drive prices down. Higher demand will reduce capacity and drive prices up.
When a carrier provides you with a per-mile rate, multiply the miles of the route by the rate you’re given to get the base price.
If a carrier provides you with a flat rate, and you want to make sure that it’s within the national average for your area, you just need to work the math a little backwards. Divide the total rate by the route mileage to get the per/mile freight rate.
Let’s assume that you routinely ship imported fruits from Miami, Florida to Nashville, Tennessee by reefer trailer- a distance of about 915 miles. A carrier quotes you a $2,500 flat rate.
In this scenario, the carrier is charging you about $2.73 a mile for the trip. While a little higher than the current average for reefers, you have to consider what else the carrier may be including in the price, like the distance and the quality of their services.
When it comes to reefer freight, as an example, you want the more experienced drivers and carriers because of the perishable nature of the goods.
LTL freight rates are often credited with being less expensive than FTL rates. This is mostly due to the fact that you’re also shipping less per journey. An LTL carrier isn’t charging you for the whole trailer space, just a portion of it.
In order to fairly charge clients, LTL freight rates are calculated using the dimensions and density of each unique shipment within the trailer. The density plays the biggest role, but let’s do the math first.
The dimensions of shipment are calculated using the height, width, and depth measurements of a fully prepped package, typically a pallet, and then converted to total cubic feet. Density is then found using total cubic feet and gross weight of the shipment.
This is easiest to do by pallet. Just remember that if you have multiple pallets in a shipment, you’ll need to then find the combined cubic footage as well, even though density will stay the same.
Use the following equations to begin your estimate.
Using those equations, we’ll calculate the measures for a 4’x4’ pallet that is 3’ tall and weighs 100 pounds.
The resulting density is 2.083 lbs/ft³, but what does that mean in terms of what you’ll need to pay?
For that, you need to know about the National Motor Freight Traffic Association (NMFTA), an industry organization that managed to standardize pricing on LTL shipments by developing a classification system based on density.
Known as LTL Freight Class, it gives shipments a ‘transportability’ rating using density as the main factor. There are 18 different levels that go from most to least dense.
The highest density ranking, class 50, is also the least expensive. It goes to class 500 which is the most expensive and has the lowest density. Using this table, the density we calculated for the sample pallet, 2.083 lbs/ft³, would place it in class 300. Unfortunately, there’s no set price per classification released publicly, which can make estimating your shipping cost very frustrating.
Some companies will provide freight calculators on their sites to help you with estimates, but those will vary.
While you are free to estimate the density and class, an official freight class can only be set by the NMFTA because there are three other metrics considered beyond density.
These metrics are used by the Commodity Classification Standards Board (CCSB) which is a division of the NMFTA. After they make a decision, items get a National Motor Freight Classification (NMFC) code. Carriers who are members of the NMFTA have access to the catalog of NMFC numbers maintained for all shipments within the United States.
Private businesses can also access this catalog through the NMFTA’s ClassIT® tool, available for a one-time fee or as part of a subscription service.
Related: LTL Freight Class vs NMFC: The Conclusive Guide for Shippers
Whether you’re arranging FTL or LTL shipments, there’s always going to be more to the price than just the base rate.
These factors influence the final total. Some you can control and some you can’t. Other factors, beyond the control of even the carriers, are things like supply and demand or fuel prices, which further affects pricing. For now, let’s focus on more tangible concerns.
The farther your freight has to travel, the more it will cost. Since you’re charged per mile rate for most FTL and some LTL shipments, this seems obvious.
However, brokers and carriers tend to break down hauls by average length.
The mileage point where companies split each will vary, and some will have additional designations. Typically, a short haul will take a day or less, usually no more than 250 miles. You’re likely to get a price per mile rate, or even just a flat rate, for a short haul to ensure that the driver, who’s still putting in a full day’s work, gets compensated for it.
Companies may actually provide you with a better per mile rate at long distances because they know the driver is being compensated for multiple days.
To ensure proper shipping and handling, categorizing freight is necessary. A pallet of bricks, a pallet of tomatoes, or crates of gas canisters have different needs to account for.
Getting good rates is easier when trucks are moving in and out of areas where loads are easy to secure. This is known as backhaul availability, and it makes it easier for the carrier and the driver to make money.
An empty trailer won’t bring in money, and it will still cost the driver in time and gas. In trucking parlance, they call them deadhead miles. Should your shipment need to go to a destination with poor backhaul availability, the rate is likely to increase to make up the costs of hauling an empty trailer to the next available load.
These are charges that carriers will add on for unique services or because of unforeseen circumstances. These can include:
For more on accessorial charges, read: Truckload Accessorial Charges Defined and Explained.
This specifically affects companies that need to ship via LTL services. Because of the role density plays in determining fees, most carriers have a minimum density requirement in place. This is the Cubic Capacity Rule, sometimes called density deficit.
The cubic capacity rule is a carrier’s way of making up costs when shipping large dimension, low-density objects. Often added as a surcharge to a freight bill if applicable, it can be the source of hefty fines on top of the standard shipping service.
Since it’s not an NMFTA rule, individual carriers set their own limits. Most will state that any shipment filling more than 750-cubic feet and with a density of less than 6 lbs/ft³ may face a surcharge for density deficit.
Here’s a quick example.
Imagine you are preparing a pallet of flat-screen televisions for shipping. Because of the product, nothing can be stacked on top. Regardless of how tall it actually is, it's very likely the carrier will set the height of your shipment at 96 inches (the standard height of a trailer) to account for the space that can’t be used.
This means your density will be calculated based on the following dimensions: 96” x 48” x 48” with a weight of 400 pounds. Let’s do the math
A single pallet would take up 128 ft³ with a density of 3.125 lbs/ft³, which falls within the standard density deficit. However, suppose you need to stock up and arrange for 6 pallets of televisions, all packaged the same way.
The combined dimensions result in 768 ft³ of space taken while the density remains at 3.125 lbs/ft³. The additional space needed then triggers the density deficit fee.
Although lower density items do pay more, once they take up a certain amount of space, the extra becomes a null profit. LTL carriers rely on the ability to take on multiple shipments. If a large, low-density shipment is taking up space that could otherwise go to a better-paying load, the carrier is going to want to make up the difference.
To better manage your freight shipping budget, there are a number of strategies you can adopt. Before we go on, I’ll point out that always going with the cheapest bidder is not among those.
Here’s what does work:
These and other strategies can help you better manage your freight budget and help you save money in the long term.
For more, check out: 15 Easy Ways to Reduce Freight Costs
Don’t be confused about how to calculate freight shipping costs; let the experts at USA Truckload help. Our services are backed by decades worth of experience in the industry, moving loads of all kinds all across the country.
USA Truckload’s extensive network of carrier partners can get your goods where they need to go while you monitor their progress.
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Get a quote today or call us directly at (866) 353-7178 and do the best for your business shipping needs by working with a carrier that won’t let you down.
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