Pricing & LTL Shipping Costs
Whether your company is involved with retail sales, logistics or manufacturing, shipment of cargo is an expense that requires careful consideration to ensure that delivery is cost effective and made on a timely basis.
Most of the time, you can take advantage of the rates offered by shippers when your products fill a standard container or truckload. Still, there are times when you’ll be shipping loads that don’t comply with the minimum requirements, whether it’s due to being light on weight or low on volume.
On these occasions, it’s smart to look into less-than-truckload (LTL) shipping to obtain rates that still make good business sense. As its name suggests, LTL shipping is defined as small freight that is transported by truckload, and is typically less than 150 pounds. While LTL loads cannot benefit from the lower rates quoted for standard containers, there are still options that are economical. One alternative is density based pricing, which might be the right fit for your company.
LTL Shipping: The Good and the Bad
- One benefit of transporting your products via LTL options is the cost. You aren’t paying for the entire truckload, but rather your share of the space your goods occupy. In some cases, you’ll be charged for the weight of your cargo instead of volume based pricing. At the same time, standard freight rates through carriers such as UPS, FedEx, or DHL are much higher if you handle shipment on a per parcel basis.
- The network of available carriers for less-than-truckload shipments enables you to be more flexible in making logistics arrangements.
- Probably the biggest drawback to LTL shipment is the time of transit for your cargo. During your load’s trip from origin to destination, it’s likely that it will be loaded and unloaded multiple times based on which trucks are available to haul to certain areas.
- Due to the delays, your service to customers can suffer when they’re waiting longer for the shipments they’ve ordered. It’s important that your customers are made aware of the time period involved and understand why these delays may occur.
Density Based Pricing Benefits
Depending on your cargo’s dimensions and weight, LTL carriers might use different formulas to determine rates, as these measurements affect their cost for transporting the cargo. You could be paying different amounts to carriers who charge by volume versus those who charge by the pound.
In response to this uncertainty, one LTL option that is gaining in popularity is density based pricing. This tactic takes into account the weight and dimensions of a shipment as measured in pounds per cubic foot, i.e., density. From this measurement, the National Motor Freight Classification (NMFC) system has established categories for certain goods as a means of streamlining shipping costs across the trucking industry. If your products fall into a NMFC class as reported on the bill of lading, you’ll pay a designated amount. The advantage is that density based pricing offers consistency and certainty in rates.
LTL shipping arrangements can be cost effective when your transportation circumstances warrant it, but it’s important to consider the advantages and disadvantages to avoid making a costly mistake. Density based pricing for less-than-truckload shipments is especially efficient when the goods that you’re moving fall into certain categories that are treated favorably for shipment by the NMFC.