Do you know the key differences between contract, volume and spot less-than-truckload (LTL) rates? What about the advantages and disadvantages of each option? Our transportation experts are here to help you understand the most common types of LTL shipping rates.
Contracted LTL rates are freight rates that are negotiated directly with an asset-backed LTL carrier. Contracted LTL rates are also commonly negotiated through a third party logistics (3PL) company. Partnering with a 3PL helps save the shipper time and money by leveraging the 3PL’s volumes to yield lower rates via the 3PL’s negotiated Ratebases, Rules Tariffs, Fuel Surcharge Tariffs and Discounts.
Contracted LTL rates are negotiated separately with individual carriers and specifically for each individual client. Contracted LTL rates are commonly reviewed on a 12-24 month basis. Contract LTL rates are typically dependent on the below freight characteristics:
Volume rates, which are synonymous with spot quotes, are freight rate quotes that are based on linear feet and weight. Shippers will commonly switch to volume rates if the shipment exceeds certain freight characteristic thresholds, as outlined in the negotiated contract.
Volume rates can also be offered to shippers even if a shipment does not exceed the contracted rate thresholds. However, the shipment must meet the carrier’s minimum volume threshold, which can be as low as eight linear feet and 4,000 pounds. Volume rates are often lower than contracted rates if a carrier does not have enough freight to fill a trailer on a given lane.
Once a shipment hits a certain threshold, whether it be due to length, weight or density, contract rates cannot be used. Common thresholds which cause shippers to switch to volume rates include:
The general guideline for switching to a volume rate is if the shipment occupies 12 linear feet or more or weighs more than 15,000 pounds. If a shipment exceeds one of these thresholds, shippers typically have to obtain a volume rate for the shipment.
However, not all carriers have the same volume rate thresholds. Certain LTL carriers, such as Averitt Express, ABF, Old Dominion Freight Lines and XPO, have a lower threshold for Cubic Capacity. Shippers should verify this threshold with the carrier, or through their 3PL, to see if a shipment qualifies for its contract rates.