Source One is introducing a new series of
blogs focused on logistics and transportation and covering a variety of themes.
This blog will address LTL data collection and how specific data points are
used to determine cost.
A common first step in any traditional
sourcing exercise is to collect data. Less-than-truckload (LTL) is no
different. But it can’t just be data; it needs to be quality data capable of
representing the true freight profile of a shipper. LTL transportation is
generally perceived as complex compared to other shipping modes.
LTL’s reputation for complexity persists for
a number of reasons:
- Shipping characteristics like cargo weight, pallet count, and freight classification affect pricing.
- Each shipper is unique. Benchmarking the mode can be challenging because it is not easy to make direct comparisons between different shippers’ operations.
- There is a tendency to accept LTL for what it is, and not take the time to gain a deeper understanding of its cost drivers. Freight networks are constantly changing and shippers need to keep up with shifting patterns of supply and demand.
When rating an LTL shipment, you need to know
the origin and destination zip codes as well as the shipment’s weight and the classification
for each product it includes. Classifications, or classes, are published by the
NMFC (the National Motor Freight Classification is a standard that provides a
comparison of commodities moving in interstate, intrastate and foreign
commerce).
What are the 18 Different Types of Freight Class?

So, how does a carrier determine what a LTL
shipment costs?
- Origin Zip = 60654
- Destination Zip = 33140
- Class = 75
- Weight = 2000 lbs or 20 CWT
- Tariff rate for class 75, 2000 lbs = 79.86
- 20 x 79.86 = $1,597.20 (the full freight rate without discounts)
LTL carriers offer discounts off of tariffs.
These discounts are negotiable, and often correlate directly with the amount of
freight volume/revenue tendered to the carrier.
In addition to discounts, minimums are also negotiable. Minimums
represent the absolute lowest amount charged per
shipment.
The calculation set out above is a basic
representation; when determining a line haul rate other factors such as
shipping FAK (Freight All Kinds), deficit weight rating, and lane specific
strategies, can add layers of complexity.
It is
very important to capture the actual class when computing an LTL price.
Often shippers are given an FAK cargo designation on invoices, a blanket
classification that obscures the actual classes –there may be multiple types of
goods involved – and introduces inaccuracies that can have a significant impact
on price. The shipper has no way of knowing which specific classes of cargo are
being shipped if everything is lumped under the FAK designation.
The most common obstacle to performing
accurate LTL analyses, running procurement initiatives, or introducing new
carriers, is missing or incomplete data – particularly the data elements that
are critical to tariff calculations (such as the actual freight class). If
these data elements are captured correctly, all parties involved will avoid
having to make flawed assumptions throughout the process.
As a helpful tool, here is a list of the
essential data fields required when collecting LTL data:
- Origin city, state, and zip code
- Destination city, state, and zip code
- Shipment date(s)
- Weights
- Freight class
- Historical costs (line haul, accessorials, fuel)
- Length of haul (mileage)
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