Facts On Freight--What Determines LDL Discount Percentages
With so many LTL freight motor carriers to choose from and complex rating structures, how do you know which carrier is best for you?
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You need an LTL freight motor carrier to ship a 500-pound pallet of parts from Ohio to St. Louis. One carrier offers you a 64 percent discount; the other a 66 percent discount. Which is the better deal?
The answer depends on many factors. You can save money on freight because it is not a fixed cost. But with so many carriers to choose from and complex rating structures, how do you know which carrier is best for you? First, let’s look at some of the basic terms to give you a better understanding of the freight industry and help answer our question.
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LTL (Less Than Truckload): LTL trucking companies specialize in smaller, non-volume hauling. LTL carriers haul shipments weighing from 1 pound to as much as 20,000 pounds or more. They are, however, most cost-effective for shipments between 250 and 7,500 pounds. While there are hundreds of local and regional LTL carriers, the large, national carriers include Yellow Transportation, Roadway, UPS Freight and FedEx Freight.
Class (Classification Of Freight): All freight shipments handled by LTL carriers are classified so the shipment can be properly rated. Class of freight is a main component in trucking companies developing an overall rate for a shipment. Classification of freight is based on a number of factors, including the density and value of the goods being shipped. Potential damage is another important factor. The lower the class of freight, the lower the rate when all other factors are the same. The higher the class, the higher the rate.
Rate: The rate is the charge per-hundredweight for transporting your freight. Components that influence your rate include the distance the shipment travels, the shipment weight and class.
Base Rates: All LTL carriers establish their own base rates. These rates differ from carrier to carrier, and from lane to lane. A carrier’s per-hundred rate may be higher in lanes where they have an overabundance of freight (that is, space is at a premium). In lanes where there is a need for freight (coming out of Florida, for example), the per-hundred rate may be lower. In other words, each carrier takes its cost of servicing each lane into account when determining its base rates.
Accessorial (Extra) Charges: Base rates cover the cost of transporting goods from dock to dock. Additional charges come into play and increase the transportation cost substantially when a shipment is destined to a residence, and when inside delivery or other special services are requested.
Discounts: You can reduce your transportation costs by negotiating discounts off of base rates. Discounts depend on several factors, including your shipping volume, your freight type, shipment origin and destination (lanes), the carrier’s coverage in those lanes and other factors.
Freight Collect: This is a billing option carriers use when the consignee (the recipient of the shipment) is to be invoiced for the shipment’s transportation charges. Freight Collect allows you to receive your negotiated discounts with your carriers for inbound shipments, effectively reducing your cost of transportation for goods shipped into your business.
Which Is The Best Deal? Now, back to our original question. How do you know which is the best deal for you? Since all carriers take discounts off of different rate bases, you must look at your costs after discount. Also, keep in mind that “best price” does not always mean “best service.”
Reliability, transit times, claims ratios, coverage and customer service all play important roles in determining who should handle your shipments. To compare carrier rates, be sure to compare your price after discount and consider all of the above factors.
The freight industry is highly competitive and, as in other industries, someone is always willing to offer a better price. The bottom line is that you need to do some homework to determine the best carrier or carriers for your company. In the world of LTL pricing, there’s a lot more to figuring your final cost than only the discount.
The PMPA Discount Shipping Program. PMPA and PartnerShip created the PMPA Discount Shipping Program to help members negotiate the confusing world of shipping discounts. You can control freight expenses, and the PMPA Discount Shipping Program is here to help.
We offer members a 64-percent discount off Yellow Transportation’s current base rates.
Yellow is one of the leading carriers in the LTL industry that offers national coverage and exceptional service. Our goal is to make sure you are getting competitive rates on product shipped into and out of your business—with a carrier you can rely on and customer service you can appreciate.
If your company is not yet a PMPA member, you can join today to gain access to the free shipping program by calling (800) 950-8020. If you already have an existing account with FedEx or Yellow, PartnerShip will automatically link it to your new PMPA discounts.
Current PMPA members can enroll online by visiting www.partnership.com/28PMPA. If you have any questions or would like more information, please call PartnerShip at (800) 599-2902, or e-mail us at info@partnership.com.
