LTL Market Changes: Are You Ready?

Are you prepared for the new LTL freight classifications released in January 2025? Have you mapped your products and measured your Density?

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LTL Freight Market Changes: A Shift to Density-Based Rating

The 90-year-old rating system for LTL freight is undergoing a significant change this year. This move is transitioning towards a density-based system that should better reflect the actual cost to ship goods. The old system has seen decades of complaints regarding its complexity and confusion.

Understanding Core Factors

The new system will still rely on four primary transportation characteristics: Handling, Stowability, Liability and Density.

• Stowability: this refers to the ease of storing cargo alongside other freight on a trailer.
• Liability: this is the coverage of the product being shipped (the higher the class, the higher the reimbursement).
• Ease of Handling: this measures how easily freight can be managed.
• Density: this is the weight of a shipment per cubic foot.

The Impact on Shippers: Dimensions and Accuracy

The major change for shippers is a new classification system, but more importantly, the need to accurately input their shipment dimensions and weights. This has often been a manual process with a lot of estimation. This will be a significant learning curve for operations teams.

The new system emphasizes not just weight but also the space a shipment occupies on a trailer. Density and dimensions play a crucial role in determining shipping costs, particularly in LTL, where customers share trailer space. The current system does not provide an accurate assessment of a product’s true density.

Cost Drivers and Invoice Surprises

The primary drivers of cost in the LTL system are distance, time and space. Distance and time are largely known factors and are easily identified on any standard BOL. If you get this right, there will be fewer surprises on your invoices.

Many shippers are losing money by allowing their carriers to classify their freight as Freight of All Kinds (FAK). This often occurs, especially for shippers who haven’t invested in dimensioning and don’t provide complete shipment details upfront. This forces carriers to make assumptions, leading to added margin on a quote to mitigate the risk of underpricing a load. Carriers avoid risk, so shippers not properly dimensioning their loads will see prices increase when these changes take effect.

It’s similar to a grocery store charging the same price per pound for poultry, whether it’s a whole bird or organic chicken breast. The store will raise the average price significantly, anticipating that customers will primarily purchase the higher-value item.

Shippers could also run into the risk of a capacity gap, as carriers are going to position equipment where they can optimize their assets, and book as many shipments as possible onto a single trailer. Knowing the Density and Dimensions of this freight will allow the shippers and carriers to both become more profitable and sustainable.

How PA Can Help

PA’s team can help drive freight optimization and ensure that you are packaging your goods most efficiently, further optimizing your spend cube. If you’re an existing PA member, reach out to your Member Advisor to learn more about these industry changes and how to unlock cost savings across your supply chain. If you’re not a PA member, reach out to us here and let’s set up a discussion.