20 June 2023
How LTL shipping rates compare to FTL rates
When your company has regular shipping requirements, you know all too well how the shipping process can impact your reputation and your revenue. With so many carrier options, confusing shipping guidelines, complex rate calculations, and loads of industry jargon, handling logistics can be stressful and overwhelming.
Generally, shippers choose between less than truckload (LTL) and full truckload (FTL) services to fulfill their shipping needs. Let’s dig into the differences between these common shipping methods and take a look at how FTL and LTL freight shipping rates are calculated.
Understanding LTL vs. FTL shipping rates
If your goods will only fill a fifth of the truck, you may not need to pay full truckload rates. Less than truckload (LTL) shipping allows multiple shippers to rent out space on the same truck. If you ship less than 4,000 pounds regularly, it is nearly always more cost efficient to use LTL rather than FTL.
LTL freight shipping is ideal for small businesses that don’t ship in bulk. While shipments might take marginally longer to reach their final destination as a result of drop-offs at multiple locations, LTL shipping rates tend to be more manageable for small e-commerce businesses.
However, if your business ships larger quantities, hiring an entire truck might make more sense. With full truckload (FTL) shipping, you contract out the entire truck, whether your goods will fill it or not. For example, if you need to ship more than ten shrink-wrapped pallets of over 15,000 pounds, you likely need to use FTL.
The best rate for your shipment isn’t always the cheapest one. So even if your goods don’t completely fill a trailer, FTL may still be a viable option. For example:
- If your customers prefer to have all of their assets isolated in one truck — FTL reduces the risk of damage that occurs from unloading and reloading on multiple trucks.
- If you are in a time crunch — FTL can be a faster method than LTL since goods are only heading to a single destination. You do not need to make multiple stops or multiple deliveries unless you choose to do so.
How freight shipping rates are calculated
The most significant difference between shipping options is pricing. Understanding the factors that affect freight shipping rates can help you select the most suitable transport method and negotiate the best rates while meeting your budget and timeline goals. It can also help you prepare your shipments accurately to avoid extra fees and ensure positive relationships with your carrier.
LTL shipping rates
Most carriers start with a base rate calculated per 100 pounds and have an established minimum rate that helps offset lighter loads and deliveries to less populated routes. The base rate is used in conjunction with a variety of other factors to determine LTL freight shipping rates. These include the following:
The National Motor Freight Traffic Association (NMFTA) uses a standard set of freight classes to help determine LTL pricing. Freight is categorized into one of 18 classes, based on:
- Density: Density is the freight’s weight divided by its volume. There is an inverse relationship between classification numbers and the density of an object, with least dense packages (less than a pound) being classed at 500. Generally, the higher the class, the more expensive/valuable the package.
- Stowability: If there are loading restrictions due to length, weight, protrusions, or if the object does not stack or have load-bearing surfaces, then the class may change.
- Handling characteristics: If an item has an odd shape, size, is fragile, extra heavy, or hazardous, it may be given a unique classification to reflect the associated handling difficulties. Basically, the easier an object is to load and transport, the less expensive it will be to ship.
- Liability: Freight that has a higher risk associated with it will cost more. This accounts for perishability, value per pound, hazardousness, and chance of theft.
Carriers use scales to measure the weight accurately. The heavier a commodity is, the less it costs per hundred pounds, but overall, heavier shipments incur higher costs. Most carriers use a tiered pricing system, based on cargo weight divisions.
The length, width, and height of the freight determine the amount of space it occupies within the truck. Carriers may use specialized equipment to measure and calculate the shipment volume.
To account for fuel prices and driver wages, the further the cargo needs to travel, the pricier it will be. That said, some carriers may offer better rates for shipping lanes and routes with higher volume or traffic.
Carriers may add accessorial fees for extra services like liftgate service, limited access locations, inside delivery, palletizing, shrink wrapping, fuel surcharges, and residential deliveries. If you negotiate with the shipping company ahead of time, you may have the ability to settle on a flat rate that waives accessorial fees.
FTL shipping rates
Like LTL, full truckload pricing also takes a variety of factors into consideration, such as:
- Distance: FTL rates are primarily determined by the distance between the pickup and delivery locations. The longer the distance, the higher the rate is likely to be.
- Truckload capacity: FTL rates are influenced by the truck’s capacity being fully utilized for a single shipment. The rate is calculated based on the space occupied by the freight and the trailer’s overall capacity.
- Weight: While weight is not as significant a factor in FTL rates as it is in LTL rates, it can still impact the final cost. Heavier shipments may incur higher charges.
- Additional services: The need for specialized equipment, inside pickup or delivery, specific handling instructions, or other additional services can result in additional charges.
When deciding between LTL and FTL, keep in mind that FTL rates are more heavily influenced by the current market conditions, so they are more likely to be negotiated on the fly and are more likely to fluctuate.
Additional FTL pricing factors include shipping lanes, fuel costs, seasonal weather conditions, origin, destination, and operation costs. FTL rates can vary widely from carrier to carrier, especially for shipments to locations off the beaten path.
Businesses with less than truckload shipments are at a disadvantage when they need to choose between LTL and FTL. The inefficiencies of LTL trucking may mean longer delivery times and a higher risk of damage, but the higher cost of FTL shipping may be prohibitive.
A cost-effective shipping alternative: Shared truckload
Flock’s shared truckload (STL) solution provides an affordable solution for shipments that don’t require the capacity of a full truckload.
Save up to 20% on shipping costs compared to FTL by combining your freight with multiple shippers and pay only for the space you need — while still getting truckload-quality service on hubless routes. Request a quote to see how STL can impact your bottom line.