LTL shipping can be challenging; there are a ton of details to understand and take into account.
Let’s break down the top 10 things to know:
- Freight class: The NMFTA governs the criteria that determine freight class and provides the NMFC (National Motor Freight Classification) number that assigns the class to your commodity. The first rule: Higher class = higher cost. Lighter and less dense items are subject to higher classes. It is important to get the freight class and NMFC number of your commodities correct to avoid reclassification charges. Learn more in our post on density and classes.
- FAK: FAK stands for Freight of All Kinds. This tool allows shippers to apply a lower shipping class to a higher classed item to receive a better rate. This is negotiated as part of your contract. Sometimes it can be a huge benefit, especially when you are shipping higher-class items.
- Minimum charge: A “minimum” or “floor” is the minimum amount a carrier can charge for a shipment. For instance, if you are shipping something with a cost of $100 and you have an 80% discount, the carrier will not move that shipment for $20. They will charge a minimum, usually somewhere between $60-$120.
- Actual class/FAK vs. minimum charges: You need to look at how many shipments fall into each class when evaluating your contract. A very aggressive minimum isn’t meaningful to a business that’s sending larger shipments that never hit a minimum.
- Pallet rates: This type of pricing is less common. Pallet rates are set rates that carriers can charge for each pallet you ship. For example, if you have a $100 pallet rate and ship four pallets, your total landed cost is $400.
- Fuel surcharge: This is an additional charge on almost all LTL shipments. The surcharge is levied as a percentage of the base shipping rate, and is based on the average cost of diesel and fluctuates weekly. These charges vary by carrier.
- Accessorials: These are all the “extra” fees carriers charge. Examples include excessive length, extended delivery area, inside delivery, residential delivery, and liftgate charges. These can be negotiated based on your specific commodities and shipping needs.
- Rate bases: All carriers publish their own rate bases. Because each rate base is different, it’s challenging to compare several carriers’ agreements side by side. An 80% discount in the same lane with two different carriers will likely net two completely different rates.
- Regional and long-haul carriers: There are two different kinds of LTL carriers. Regional carriers only cover a certain area of the country, while long-haul carriers typically cover the entire United States. Both have their benefits, and it is important to determine your shipping lanes to see which carriers work best with your specific needs.
- Billing: Carriers do make mistakes when billing their clients. It is important to know what to look for and review all invoices for errors.
The list above isn’t exhaustive. The long and short is that there’s a lot to know. Are you using the correct NMFC? Does an FAK really make sense for you? Who within your organization can accurately audit your freight bills for errors?
A qualified logistics partner can provide a fresh perspective on your current freight environment and opportunities for bottom-line savings and efficiencies.