Translogistics Blog

TLI University: Less Than Truckload 101

May 24, 2018

Written By: Translogistics

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Welcome to TLI University!

With more than 20 years in the industry we thought it was time to pass along some of the knowledge that helped us get to where we are today. This is a weekly publication aimed to educate anyone who is curious about transportation and shipping.

This week begins a thorough description of "Less Than Truckload," or LTL, and defines the characteristics of this type of shipment. 

 

What is LTL?

  • LTL means “Less Than Truckload” and means that a shipment does not take up the full available capacity of a truck trailer
  • These shipments will generally weigh no more than 20,000 pounds
  • LTL companies will make pick-ups at various shippers who all have shipments that do not take up the full capacity of a truck trailer – these pick-ups are performed by Pick-up and Delivery (P&D) drivers
  • Shipments will be transported back to origin terminals, consolidated onto full trailers and moved to destination terminals or to one or a series of hub / distribution facility for redistribution – these trailers are moved by Linehaul drivers
  • Linehaul shipments can be moved on single 48’-53’ trailers or on double or triple 28’ trailers, also called Pup trailers (see image below).
  • Destination terminals will deliver the LTL shipments to individual consignees with Pick-up and Delivery (P&D) drivers

Some examples of TLI LTL carriers are: R&L Carriers, YRC Freight, Estes Express Lines, New Penn Motor Express and Old Dominion Freight Line

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What information is needed when booking an LTL shipment?

  • Origin (Shipper) City, State and Zip Code
  • Destination (Consignee) City, State and Zip Code
  • Shipping Date and Time – When is the specific time or “window” that the shipment is to be picked up by the carrier?
    • Note – LTL shipments can generally be picked up the day that they are called in if called in by 1:00 – 2:00
  • Delivery Date and Time – When is the specific time or “window” that the shipment is to be delivered by the carrier? Does the consignee require an appointment?
  • Number and Types of Pieces Shipping – How many pallets, bundles, cartons or pieces are shipping?
  • Product Stackable? Due to the nature of some product, the shipper may not want the pallets to be stacked one on top of the other
  • Weight of the Shipment – How much does the total shipment weigh?
  • Freight Class – provided by the customer or National Motor Freight Classification book (assisted by Audit Department)
  • Commodity of Shipment – What product(s) does the shipment consist of? What is the National Motor Freight Classification number (as mentioned above)
  • Purchase Order and / or Other Reference Number – what is the customer’s Purchase Order Number? What paperwork do they need it listed on? Is there any other reference number that the customer would like included on their paperwork?
  • Value of Shipment – Is the product high value? Is additional cargo insurance required? Additional cargo insurance can generally be purchased at a stated rate per unit of insured value – as example: $0.30 per $100 of insurance – in this example an additional $100,000 of coverage would cost $300 above and beyond the freight charge
  • Does the customer need a Guaranteed Delivery Date or Time? Guaranteed services can be purchased generally as a percentage of the freight bill – as example – a shipment can be guaranteed for a specific delivery day for a 30% charge – in this example a shipment with a freight charge of $300 can be guaranteed for a delivery on a certain day for an additional fee of $90 (30% of $300)
  • Are special services required? Some customers require special services such as hydraulic lift gates, residential delivery or inside delivery, etc. – special consideration must be taken to ensure that the carrier is aware of these special services and their additional charges – a description of these services can be viewed under the “LTL Language” section below

 

How is LTL priced?

  • LTL carriers determine how much a shipment will cost based on the lane (origin zip code to destination zip code), the weight of the shipment and the portion of the capacity of a trailer that a shipment will take up – the total cost consists of the following contributing factors:
    • Lane Pricing – LTL companies determine a rate per 100 pounds, which is called “hundredweight” (identified as CWT) for every zip to zip combination in their operating area based on operating costs and carrier’s needs
    • Weight – Within every lane, the carrier will determine the hundredweight (CWT) rate for the shipment’s weight – a carrier’s operating cost becomes lower per hundredweight as the shipment weight rises – this allows them to provide lower rates as weight rises – the hundredweight (CWT) rate becomes lower at each of the below “weight breaks”
      • 500 lbs.
      • 1,000 lbs.
      • 2,000 lbs.
      • 5,000 lbs.
      • 10,000 lbs.
      • 20,000 lbs.
    • Volume of trailer used (freight class) – carriers cannot base pricing strictly on weight alone – the reason being is that 1,000 pounds of feathers will take up a lot more space on a trailer than 1,000 pounds of lead ingots – carriers compensate for this by charging a higher rate per hundredweight (CWT) for items that are “less dense”, which allows them to be compensated for filling more of the trailer’s capacity – heavy items have a low freight class – light items have a high freight class – LTL freight classes are as follows:
      • 50
      • 55
      • 60
      • 65
      • 70
      • 5
      • 85
      • 5
      • 100
      • 110
      • 125
      • 150
      • 175
      • 200
      • 250
      • 300
      • 400
      • 500
    • Generally speaking but not necessarily always the case, the hundredweight (CWT) rate for a particular freight class is generally in a percentage proportion to another freight class – for example, the hundredweight (CWT) of a class 200 shipment would be twice as the CWT of a class 100 shipment – in this case the class 200 shipment going from a specific zip code to another zip code would be $100 per hundredweight (CWT), while a class 100 shipment going from the same specific zip code to another zip code would be $50 per hundredweight (CWT) – Conversely, a class 50 shipment would have a hundredweight (CWT) rate of one half of the class 100 and one quarter of the class 150 at $25 per hundredweight (CWT)
    • Freight class for every product that can possibly ship is identified in the National Motor Freight Classification book, which is located in the TLI office in the Audit Department – some products are identified with a specific class regardless of its density (pounds per cubic foot) – for example, a barbell plate may be identified as a freight class 50 – some other products, such as plastic articles, are identified with a freight class based on the “density” of the product – density is determined by “pounds per cubic foot” – for the plastic articles example, a product with a density of 4 pounds per cubic foot but less than 6 pounds per cubic foot is a class 150, while a product with a density of 10 pounds per cubic foot but less than 12 pounds per cubic foot is a class 92.5
    • A shipment’s volume can be determined by the formula:
      • Length (in inches) x Width (in inches) x Height (in inches) / 1728
      • A pallet that is 48” L x 40” W x 77” H is 147,840 cubic inches / 1728 = 85.56 cubic feet
      • If we have a shipment weighing 487 pounds, we divide this weight by 85.56 cubic feet to arrive at a resultant 5.69 pounds per cubic foot – in the example above, this would fall with the freight class 150 description for “plastic articles with a density of more than 4 pounds per cubic foot but less than 6 pounds per cubic foot”

 

 LTL Language

  • FAK – stands for “Freight All Kinds” – this is a negotiation tactic used by the Logistics Department and any other Logistics Manager to group freight classes under a lower freight class – the FAK also lowers the probability that a shipment will get “reclassed” out of a negotiated rate level – for example, Logistics could negotiate an FAK 100 for classes 110-150 – in this example, a shipment with a freight class of 125 would move at the class 100 hundredweight (CWT) rate for a specific zip to zip lane
  • Tariff – Each individual LTL company has their own schedule of rates (aka tariff) that provides a hundredweight (CWT) rate for every possible combination of origin zip code to destination zip code with every possible freight class and every possible weight break within those zip combinations – needless to say this results in millions of possible combinations
  • Discount Level – Once the overall rate is determined for a shipment given the origin zip code, destination zip code, weight and freight class, hardly any shipper in the country will ever pay the full rate – the carrier will negotiate discounts with all of their customers based on various factors – in today’s LTL industry, it is not unusual to see discounts between 70% and 90% off of the base rate tariffs
  • CzarLite Tariff – As we see in the retail industry, companies will advertise “70% off original ticketed price” to attract customers, but they don’t tell you that the original ticketed price may have been 20% higher than it should have been in the first place – trucking companies have also learned to play this game a long time ago – they inflate their base rates to a point where they can offer more attractive discounts, such as the 90% discounts mentioned above – this may easily become deceiving – for example, say YRC Freight is offering us a base rate on a shipment of $400 and they are offering an 80% discount to arrive at a discounted rate of $80 – then consider that Estes approaches and states that they can offer us an 85% discount – however, they neglect to inform us that the base rate on the same shipment is $550 – their discounted rate with this “better” discount would become $82.50 and hence more costly than YRC Freight regardless of their discount level
    • In order to avoid this issue, TLI operates off of a standard tariff base called CzarLite – since all TLI carriers utilize this tariff, their base rates are the same and it becomes easy to determine a carrier’s competitiveness based solely on their discount levels
  • Minimum Charge - The absolute minimum charge that a carrier will charge for an individual shipment – usually $50 or higher – this is used to cover the carrier’s fixed costs for handling a shipment even if it is very low weight
  • Deficit Weight – As mentioned previously, hundredweight (CWT) rates decrease at weight breaks as weight increases – the carrier will utilize deficit weight pricing by rating a shipment at a higher weight with a lower hundredweight (CWT) rate if it is beneficial to the shipper – this rule is generally put in place when a weight gets above 80% of the next weight break – Example:
    • A shipment weighs 1,800 pounds with a CWT rate of $10.00 for a freight charge of $180.00
    • The 2,000 pound weight break has a CWT rate of $8.00
    • The carrier will declare the shipment as 2,000 pounds to improve the shipper’s pricing as:
      • 1,800 pounds @ $8.00 per CWT = $144.00
      • 200 pound deficit weight @ $8.00 per CWT = $16.00
      • The deficit weight rule would result in a $160.00 total charge and a savings of $20.00 for the shipper
    • Transit Time – The number of business days that a carrier advertises it will take to deliver a shipment from origin to destination
      • Note that transit days are NOT guaranteed by LTL companies – Guaranteed service may be requested at a surcharge – most LTL companies will meet advertised transit times between 90 and 98% of the time
    • Blind Shipment Charge – A charge assessed by a carrier for processing a shipment where either the shipper is not allowed to know where a shipment is destined to, or a receiver is not allowed to know where a shipment has originated from – this is generally a flat charge per occurrence
    • Canadian Processing Fee – A charge assessed by a carrier for processing shipments going from or to Canada – this charge can be assessed as either a flat rate per border crossing or as a rate per hundredweight (CWT) per border crossing
    • COD (Cash On Delivery) Charge – A charge assessed for requesting the carrier to collect the product invoice from the consignee – this charge is generally assessed as a percentage of the invoice value collected with a minimum charge
    • COD Cancellation / Correction Charge – A charge assessed for requesting the carrier to cancel or make a change to a COD – this charge is generally assessed as a flat rate
    • Construction Site / Limited Access Delivery – A charge assessed for requesting a carrier to execute a delivery or pick-up at a construction site, or a limited access area, which is defined as locations such as prisons, schools, piers and military bases, etc. – this charge is generally assessed as a flat rate
    • Fuel Surcharge – A charge assessed to help the carrier recoup excess costs for high fuel costs – this charge is assessed as a percentage of the freight bill
    • Guaranteed Date Delivery – A charge assessed when the carrier is instructed to guarantee delivery on a certain day or time – this charge is generally assessed as a percentage of the freight bill
    • Hazardous Material Charge – A charge assessed when the carrier is requested to handle Hazardous Materials – this charge is generally assessed as a flat rate
    • High Cost Delivery / Pick-up Surcharge – A charge assessed when a carrier is requested to make a delivery or a pick-up in an area that is costly for the carrier to reach such as areas with high tolls or heavy traffic congestion – examples would be the Florida Keys, New York City or Washington, DC – this charge is generally assessed as either a flat rate or as a rate per hundredweight (CWT) with minimum charges
    • Inside Delivery / Pick-up Surcharge – A charge assessed when the carrier is requested to make a delivery or pick-up inside a building – this charge is generally assessed as a rate per hundredweight (CWT) with a minimum amount – this is also generally an additional charge if the carrier has to deliver on higher floors in a building
    • Lift Gate Charge – A charge assessed when a carrier is requested to supply a hydraulic lift gate at pick-up or delivery – this charge is generally assessed as a flat rate
    • Notify Charge – A charge assessed when a carrier is requested to notify a consignee that a shipment is arriving – TLI generally has this charge waived and the carrier provides us this service for no charge when it is necessary
    • Overdimension / Overlength Charge – A charge assessed when a single piece of a shipment is over a certain length or dimension – each TLI contracted LTL carrier has different specifications of what they consider overdimension or overlength – this charge is generally assessed as a flat rate
    • Reconsignment Charge – A charge assessed when a carrier is requested to deliver a shipment to a location different from the consignee on the original Bill of Lading – this charge is generally assessed as a flat rate as well as any additional charges that may be incurred from making this change, especially if the carrier needs to reroute the shipment
    • Redelivery Charge – A charge assessed when a carrier attempts to make a delivery to a consignee, but is unable to deliver due to no fault of the carrier – this charge is generally assessed as a rate per hundredweight (CWT) with a minimum charge
    • Residential Delivery Charge – A charge assessed when a carrier is requested to make a delivery or pick-up at a residential address – this charge is generally assessed as either a flat rate or as a rate per hundredweight (CWT) with a minimum charge
    • Reweigh / Inspection Charge – A charge assessed when a carrier needs to reweigh or inspect a shipment – TLI generally has this charge waived with our carriers – however, TLI as well as our customers may be responsible for additional charges if the weight or freight class is determined to be inaccurate as a result of the reweigh or inspection – we would merely not be responsible for the charge of the carrier performing the actual reweigh or inspection
    • Single Shipment Charge – A charge assessed when a carrier only picks up one shipment on a single day from a certain location – this charge is generally assessed as a flat rate and is normally waived for TLI
    • Sort and Segregate Charge – A charge assessed when a carrier is asked to sort and segregate shipments in one of their distribution facilities – this charge is generally assessed by the higher of a rate per piece or a rate per hundredweight (CWT) with a minimum charge
    • Storage Charge – A charge assessed when a carrier is requested to store a customer’s freight at one of their facilities – this charge is generally assessed as a rate per hundredweight (CWT) with a minimum flat rate per day

 

Stay tuned for more information on LTL shipments!

 


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