This short article provides a brief overview of the LTL rates (contract) (SA). Contact crt@ftrintel.com with additional questions.
Rates in less-than-truckload operations typically are more complex than those in truckload. In truckload, pricing generally assumes that a single shipper is covering the entire trailer movement to the limit of the weight or cube capacity of the trailer. In LTL, size – and weight – matters for individual shipments, which might be as small as a package or as large as a piece of machinery as well as one or more pallets.
Because of this high degree of variability, FTR bases its estimates on revenue per hundredweight in the contract arena. As with truckload rate data, FTR converts normalized LTL rate data into an index to minimize the distractions inherent in the variability based on freight classification, geography, and service offerings. The index is based on average rates in Q1 of 2008.
FTR employs the same techniques it uses with truckload rates to help isolate the effects of underlying freight market dynamics on rates, including seasonal adjustments of the data and calculating rates both with and without fuel surcharges.
Active truck utilization plays a central role in FTR’s forecasts of LTL rates as it does with truckload. While LTL and truckload have different freight profiles, strength or weakness in truckload rates – especially in dry van – inherently affects LTL pricing due to the substitution potential.