Factors that determine LTL rates and what should the carriers expect in 2020

Less Than Truck Load shipments in India are typically carried on 20, 24 and 32 feet truck ranging from 7 to 14 tons. The shipments are always lesser than 7 tons to be qualified for LTL, typically small consignments ranging from 50 Kilograms to 5000 kilograms. Any weight above 5 Tons in transportation services is considered as Full Truck Load since a range of trucks are available in India upwards 7 Tons to deliver long distances.

LTL freight rates can be confusing, both to the shipper and the operator. A few operators convert the weight into Cubic Feet (Cft) and have a standard figure kilogram figure per Cft that may be anywhere between 8-12 Kgs per Cft. Full truck loads usually have rates fixed on the size and the distance and are regulated in India by the freight brokers. And there are too many factors that influence the rates of LTL also known as Part-Load consignment in India that will have an impact on the cost of consignment.

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The LTL rates differ from warehouse to warehouse consignment and Door-to-Door services providing first mile and last mile for the shipment. We provide 10 factors here that influence the part-load consignment rates:

  1. Weight: The load capacity of the entire truck is divided into smaller consignments to calculate the cost per consignment according to its particular weight. The rates are thus affordable to the consignors giving them the advantage of cost sharing for the distance.

There can also be instances of trans-shipment when a particular consignment routed for a certain destination is off-loaded at a particular point to be loaded on a truck going towards the billed destination. In such cases, either the cost is lesser due to the time taken, or it is higher due to the higher rerouting cost.

 

  1. Classification of commodities: Freight is specifically classified into various commodities. This classification is published by the Ministry of Transport, Government of India in its charter. The classification is determined by the types of commodities as follows:

Acids and alcohols | Alloys and metals | Bricks and Stones |Barrels | Caustic, Potash and Soda |Cement |Chemicals |Clay and Sand |Coal and Coke | Foodgrains, flours and pulses |Fish | Fruits and Vegetables | Edible oils | Groceries | Iron and Steel | Leather, Rubber and Plastic | Mineral and Ores | Machinery and Machine tools | Metal scrap and Pig iron | Motor Vehicles | Oil cakes and seeds | Petroleum products and Gases | Salt | Soap | Sugar | Sugarcane | Timber | Textiles | Vegetable Oils

 

  1. Distance: The cost of consignment obviously depends on total weight and distance. Not all part-load carriers cover the total geography of India and they are classified according to the route they ply their trucks. There are a few transport companies that consider booking orders for all routes and have built a network of operators that enables them to ship goods to any destination by adopting trans-shipment method. This method is also called interlining and the cost can be dramatically high due to zero last-mile control by the original operator.

 

  1. Freight all Kinds (FAK): Commodities not specifically mentioned in the classification are charged at FAK rates. A consignor may have a mix of goods that must be shipped – such consignment too is charged bases FAK. This may or may not produce significant savings to the consignor since this depends on the total dimension of the goods that may occupy the truck space.

 

  1. Rate negotiation on contract: You will have a regular shipment of your goods on a certain route for which you come into a rate contract with your chosen operator. If you have analyzed your shipment well according to the total weight you ship per month, you can arrive at a suitable tariff for your shipment by negotiating a contract deal with the shipper.

If you are new to LTL shipments and have poor knowledge on the specifics of consignment, you could end up paying higher rates, may be 30-40% higher. You would be able to avoid such high costs by following the factors given above and pursue standard freight practices, of course upon learning that you gain by experience.

2020 has now converted into a tumultuous year for the supply chain and logistics industry due to the lockdown globally in the wake of Covid-19 barring the months of January and February when India was still confidently pursuing its economic activities.

While in 2019 the LTL loads were exponentially greater than the forecasted demand, the operators should by now rest on the fact that the unrest in the economic activity due to the prolonged lockdown will disrupt the shipment methods due to softening in demand and thus will get diverted to full truck load consignment of whatever activity being allowed by the Government of India. FTL and LTL operators are unlikely to strike a balance for consignment orders at least in 2020.

We are however yet to come across the latter half of 2020 that might spell some advantages for LTL operators with combined effects from government mandates through the financial stimulus it has declared and the judicious implementation of the receivers to bring the economy back on track.

 

 

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