Shipping: Class or No Class?
Class or No Class?
There are three primary ways carriers’ price LTL (less than truckload) shipments. Understanding the different methods can be helpful to you when trying to determine the best carrier for your various shipments.
- NMFC- Freight Class Model
- Per Pallet Model
- Per Hundred Weight Model
This article will explain the different models for determining the base freight rate. All carriers also have different surcharges like (fuel surcharges) and charges for extra services beyond dock to dock, first come first serve (like appointments and tailgate etc). These are separate from calculating the base freight rate.
NMFC Freight Class Pricing Model
Rating by Freight Class for LTL carriers has been around since the 1940’s. It is a method of grouping all commodities that can ship by truck with similar shipping characteristics into categories (classes) for the purpose of standardizing the calculation of the freight cost. Freight class can have advantages if you ship small shipments (the minimum charges can be great), understand the rules and the class of your shipments, and ship less than 5 pallets at a time. It is also common with the larger carriers you may need for specific services and areas so you definitely want to have an understanding of it.
The NMFC Freight Class System has evolved to some degree over the years but it is still the dominant LTL pricing model for shipments within the USA or between the USA and Canada. The rating method is per hundred weight (a price for every hundred pounds the shipment weighs). The actual price per hundred pounds to be applied is determined by the freight class.
Some carriers determine their own rates and minimums for each freight class, origin and destination. It is also very common to use standardized benchmark pricing tariffs like Czarlite with carrier specific minimums and discounts.
There are 18 different Freight Classes ranging from Class 50 to Class 500. The lower the freight class, the lower the cost per hundred pounds to ship those goods. There are four factors utilized to determine the freight class:
- Density- Pounds per cubic foot
- Stow-ability-Odd dimensions or special requirements for stowing in the trailer
- Ease of Handling- Durability and ease of loading and unloading
- Liability- The level of risk for damage or theft
Some commodities are difficult to standardize because the characteristics vary depending on the specific items being shipped. For this reason, some classes have a density component. Other such commodities have not be given a class at all. They are shown as NOI (Not Otherwise Indicated). This means that the class will be determined by the density of the shipment.
The NMFC Class system can have challenges. For one thing, the NMFC Classification is not a free resource. You need to either purchase the hard copy for around $300 or purchase the online version which is a similar price per year. Another challenge is learning how to find your specific product NMFC code. There are so many products and they are often not called exactly what you might call them. In some cases you have to make a general assumption and say this is the closest description I can find. Another challenge is learning the rules when you are shipping products with different freight classes within the same shipment.
A lot of people are not interested in purchasing the NMFC Classification and even more find it difficult to navigate learning the rules and finding their NMFC. For this reason, quite often shippers use the wrong freight class or the carrier believes it is the wrong freight class. In these cases the shipment will be re-classed (re-rated at the proper class). Typically, there is an admin charge for changing/re-classing a shipment in addition to the re-rate at the proper class.
Lately there has been a push to move away from the outdated NMFC based freight class to the less complex density based freight class. With new technologies there is increased ability for carriers and shippers to efficiently measure and weigh shipments. With so many NMFC codes already being density based class, and density already being a dominant factor in determining freight class and with so many other countries having long ago adopted a density based model. It is felt to only be a matter of time before a density based model becomes the mainstream in the USA as well.
Many carriers have already adopted the model. Some of the challenges to the change are how to incorporate rules to address the other three factors that are used to determine the NMFC classification and the cost many shippers will bear to change their internal systems away from the NMFC classification they have been working with for many years
Class By Density Chart
The chart below helps you understand how to determine freight class based on density only. To use the chart you must be able to determine the weight per cubic foot of your shipment.
To determine the cubic feet of your shipment multiply the Length x Width x Height (in inches) of your shipment and divide by 1728 (1728 is a cubic foot-12x12x12 =1728) This will give you the cubic feet occupied of each skid or handling unit. Total the cubic feet of all handling units. Divide the total weight of the shipment by the total cubic feet occupied. This will give you the Weight per cubic foot of your shipment.
Use the chart below to determine the class by density. As identified previously, this will work for many carriers but it is not 100 percent. Some carriers may reclass your shipment based on the actual commodity of the shipment. More and more carriers are going to this model of classification but there are still many that do not. Your shipment may be reclassed.
| Minimum Density | |
|---|---|
| (Weight per cubic foot) | Freight Class |
| 50 | 50 |
| 35 | 55 |
| 30 | 60 |
| 22.5 | 65 |
| 15 | 70 |
| 13.5 | 77.5 |
| 12 | 85 |
| 10.5 | 92.5 |
| 9 | 100 |
| 8 | 110 |
| 7 | 125 |
| 6 | 150 |
| 5 | 175 |
Per Pallet Pricing Model
Per pallet pricing is also a common and simple rating method. Per pallet pricing can be a great option if you ship on standard pallets, have bulky and heavier shipments or if you are just looking for less fluctuation in your transportation costing.
Carriers provide rates per pallet space occupied in the trailer for the requested origin and destination. The carrier will define the parameters for a pallet space for the pricing they provide. As long as the pallets shipped do not exceed those parameters you can use your rate sheet to determine your rates based on the number of pallets shipped from the specific origin and destination.
As an example:
A carrier provides per pallet pricing from Toronto, ON to Los Angeles, CA. They indicate that their pallet rates are for each pallet not exceeding 48” (Length), 48” (Width), 84” (Height) and 1650 lbs.
1 Pallet- $300
2 Pallet- $450
3 Pallet- $550
4 Pallet- $700
If the customer ships a pallet: 48x48x40- 300 lbs or a pallet 48x48x80- 1200 lbs, the rate will be the same. Using this rate sheet (purely fictional for illustration purposes)
The base rate would be $300
If they shipped one pallet 48x48x40- 300 lbs and one pallet 48x48x80- 1200 lbs together the base rate would be $450.
It is a very simple model. Depending on the carrier, you could possibly have pallet rates up to 10 pallet positions.
The per pallet model is very simple and easy if you ship standard pallets. It is a little tricky if your shipments are loose pieces have unconventional dimensions or are excessively heavy.
Per Hundred Weight Pricing Model
The Per 100 Weight Model is a very common model for carriers outside of the USA. It is also the model used by the majority of regional and national couriers. It too utilizes a per hundred weight pricing tariff but instead of relying on a freight class to determine the rate to be applied, a dimensional weight factor or divisor is used to determine the billable weight that the rate tariff will apply to.
Since the amount of freight that can be loaded into a truck or trailer is limited by both space and weight and this pricing model is per hundred weight (rate per hundred lbs. of the shipment). There has to be a method of recognizing the space the shipment occupies as well as the weight. Dimensional weight is that method. Carriers provide per hundred weight rate tariffs subject to a dimensional weight factor or divisor. To understand dimensional weight you need to envision that there is a minimum weight for every cubic foot of space your package occupies, dimensional weight. A cubic foot as we identified previously is 12x12x12 or 1728 inches.
Carriers determine and provide the dimensional weight factor or divisor they use to calculate dimensional weight. The dimensional weight factor is usually between 10 and 13 lbs. per cubic foot depending on the carrier. So if the carrier says there tariff is subject to 10 lbs. per cubic foot and you want to calculate your dimensional weight you multiply Length x Width x Height (in inches) for each pallet (handling unit), total all for total cubic feet, divide that by 1728 (a cubic foot in inches) and multiple by 10 lbs. Do not use fractions for your dimensions, round any fraction to the next whole number.
Dimensional Weight Factor
The carrier will provide you with the Dimensional Weight Factor. In many cases it will be expressed by saying these are your rates subject to 10 lbs per cubic foot or whatever there Dimensional Weight Factor is. As mentioned previously this is typically between 10 and 13 lbs. per cubic foot but will differ depending on the specific carrier.
To determine the dimensional weight using the carriers Dimensional Weight Factor:
L x W x H = cubic feet
1728
Total the cubic feet for all pallets (handling units)
Multiply number of cubic feet x 10 to get the dimensional weight
For a quick example we will use a skid 40 x 48 x 48
40x48x48 = 92160 = 53.33 cubic feet
1728 1728
53.33 x 10 lbs. = 534 lbs. (round any fraction to next whole number)
The dimensional weight in this case is 534 lbs.
Dimensional Weight Divisor
In some cases, carriers instead of expressing the dimensional weight factor per cubic foot, will provide a divisor that makes the calculation easier for you. In these cases they provide you with the number of cubic inches per pound to calculate the dimensional weight. With the carriers divisor you can calculate the dimensional weight.
As an example, a dimensional weight divisor of 139 is a common divisor for carriers and couriers. To determine dimensional weight you multiply L x W x H (in inches) and divide by the divisor. This method saves you the extra step of having to multiple cubic feet by the weight factor to get your dimensional weight.
L x W x H = dimensional weight
139
Using the same skid 40x48x48 as previous example:
40x48x48 = 92160 = 663.02 lbs.
139
Rounded to the next whole number the dimensional weight will be 664 lbs.
If you’re curious, and want to know what the dimensional weight factor is for the divisor, 1728 (a cubic foot) divided by the divisor shows you what the weight factor is for that divisor.
1728 = cubic weight factor
Divisor
1728 = 12.43 lbs. per cubic foot is the Dimensional Weight Factor for the divisor 139
139
Billable Weight
Now that you fully understand dimensional weight. What is the Billable Weight?
The billable weight is the greater of the actual weight or the dimensional weight.
As an example:
Using our example, 40x48x48, actual weight 400 lbs.
We will use the common divisor of 139 to determine dimensional weight
40x48x48 = 92160 = 663.02 lbs.
139 139
The dimensional weight is 664 lbs.
Since 664 lbs. is greater than the actual weight of 400 lbs. The billable weight is the dimensional weight of 664 lbs. If the actual weight of the skid had been 700 lbs. Then the actual weight would have been the billable weight.
Carriers can also provide different per hundred weight tariffs subject to different dimensional weight factors or divisors.
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