Volumetric Pricing: How to understand the new way LTL freight is priced

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Picking the right less-than-truckload (LTL) carrier is never an easy task. Every carrier is different, each with their own idiosyncrasies and a bunch of different rules for doing the same things.

One of those rules is how the calculate freight class.

Once upon a time there was a set rule that all carriers followed that made picking freight class easier. These were the NMFC (National Motor Freight Classification) codes. The NMFC codes were always changing to meet the ever expanding list of shippable items, but mostly the codes were standardized and made picking the right one easier.

In recent years carriers have gotten a lot smarter about how they determine freight class. The advent of new technology has allowed carriers to more accurately weigh and plan out shipment to better fit in their trailers. This has led to a rise in a new way of determining freight class called Volumetric Pricing.

What is LTL Volumetric Pricing?

The basic tenets of volumetric pricing are simple. There is limited space in a trailer for carriers to utilize. Carriers are going to try and use that space the best they can with the least amount of waste and the highest profit possible.

This is why a lot of carriers are moving towards this new style of pricing. NMFC codes are an old way of looking at freight, they were put into use in the 1940s and were the industry standard until very recently. With the advent of new technology to better measure and weigh freight, carriers have been making the switch to volumetric pricing.

How is Volumetric Freight priced?

Volumetric shipping is based on both the true or actual weight of the shipment, as well as the volumetric weight or density.

In order to calculate the volumetric rate, you need to multiply the length of the shipment, by its width and height, and divide that number by 1,728 (12 inches by 12 inches by 12 inches) if all your dimensions are in inches. This number is the volume of the your shipment.

Now you need to take that number and divide the actual or true weight by the volume and that will give you the density of the shipment. The density is the magic number that carriers are looking at when it comes to these new rules. There are online density calculator if math wasn’t your best subject in school, such as the ones inside Shipwell's web application.

However, density is not the only factor they look at, but it plays a large part in determining the freight class. Other important things that factor into freight class are the shipments stowability, special handling needs and the liability the carrier is taking on when agreeing to ship your item.

Basically, how easy to handle is your freight, how fragile is it, and what is its value.

The future of freight pricing

NMFC codes aren't gone as some carriers still use them, but going forward, it's going to be even more important to understand how a carrier prices freight and, if it's volumetric, being able to calculate the density of that shipment.

Every LTL carrier understands that the best way to run profitable freight is to understand the size and weight of its shipments to better fit more shipments onto a trailer. This also means that shippers, the businesses shipping freight, need to accurately measure their freight because LTL carriers will charge overage variances on freight that comes in heavier, lighter, or bigger than it was originally quoted for. 

The freight industry is going to continue catering to carriers, who will continue maximizing the productivity of their trucks. The best thing that you can do is make sure your weights and measurements are correct and to stay on top of your carrier's pricing changes or choose to work with a knowledgable third-party with experience in LTL freight shipping (ahem). 

If you have questions about how to best move your freight, you can always reach out to us at sales@shipwell.com or sign up to see how Shipwell can help you ship well.