Are the percentages in your favor?
By Ray Bohman -- Logistics Management, 6/1/2000
Probably the first time you ever scanned the National Motor Freight Classification (NMFC), you noted that every description was assigned one or more of 18 different classification ratings ranging from Class 50 to Class 500. Most likely, you assumed that if one article was assigned a Class 100 rating and another Class 125, the Class 125 rating, when applied to a carrier's scale of class rates, would be 125 percent of the Class 100 rate.
It's a common assumption, but it's wrong. If you compare the percentage relationship of actual LTL class rates to Class 100 rates with the percentage relationship of classification ratings to Class 100 ratings, you'll find they are not in sync.
To determine what those percentage differences really are, we decided to take a closer look at one major LTL carrier's class rates. We have chosen, at random, rates applicable from Atlanta, Georgia, to Denver, Colorado, on shipments weighing less than 500 pounds. (We found basically the same percentage rate relationships under each weight group all the way up to 9,999 pounds):
As you will see from the chart, if your freight is rated above Class 110, the actual percentage relationship of rates to the true rating percentage relationship between classes is lower, favoring shippers of light and bulky articles.
On the other hand, the actual percentage relationship of rates to the true rating relationship between classes is higher on heavier-density articles rated Class 85 and lower. Thus, if you are negotiating a Class 55 FAK rating from your current Class 60 rating, your rates won't be dropping by 5.00 percentage points, but rather closer to 3.53 percentage points. That's because over the years, some general rate increases have been subject to higher percentage increases on lower-rated articles than were applied on higher-rated articles, thereby skewing percentage relationships to Class 100 rates.
I should also note here that current percentage rate relationships to Class 100 rates can vary by carrier, by lane, and by weight group.
Ray Bohman
Ray Bohman is a well-known consultant and author. Mr. Bohman is editor of several highly successful newsletters on transportation and is a consultant to a number of national trade associations. He is president of The Bohman Group, consultants and publishers in the freight-transportation field. His offices are located at 27 Bay Lane, Chatham, MA 02633. Phone: (508) 945-2272.
Bohmen on Pricing
| NMFC Class Rating | True % Relationship to Class 100 | Representative % Relationship to Class 100 RatesClass 100 Rates |
|---|---|---|
500 |
500% |
476.77% |
400 |
400% |
383.12% |
300 |
300% |
289.40% |
250 |
250% |
242.58% |
200 |
200% |
195.78% |
175 |
175% |
171.21% |
150 |
150% |
148.24% |
125 |
125% |
124.39% |
110 |
110% |
110.60% |
100 |
- |
- |
92.5 |
92.5% |
92.15% |
85 |
85% |
86.50% |
77.5 |
77.5% |
78.43% |
70 |
70% |
74.35% |
65 |
65% |
68.55% |
60 |
60% |
64.63% |
55 |
55% |
61.10% |
50 |
50% |
57.64% |
NMFC ratings and class rates don’t match up
08/31/2008
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