All You Need to Know: Less Than Truckload (LTL) Shipping
In today's dynamic freight transportation landscape, not every freight load will fill an entire truck all the time. Supply chain managers have to act quickly to optimize freight loads while meeting customer demands. This is when less than truckload (LTL) shipments come into the picture.
What is Less Than Truckload (LTL)?
Less-than-truckload (LTL) is a shipping term for a cost-effective freight transportation mode designed for shipments that occupy less than the full capacity of a standard truck trailer.
Unlike full truckload (FTL) shipping, which utilizes an entire trailer for a single shipment, LTL consolidates multiple smaller shipments from various shippers onto the same truck.
Key characteristics of less than truckload (LTL) shipping
LTL shipments tend to have smaller freight volumes that weigh between 150 and 15,000 pounds, making it a popular choice for a wide range of industries that are known to ship out small freight volumes often. Some of these industries include:
- Manufacturing
- Retail
- E-commerce
- Consumer goods
- Industrial products
Depending on the pallet sizes, each shipment usually comprises 10 pallets or less.
How are less than truckload (LTL) freight rates calculated?
LTL freight rates are calculated mainly based on a couple of factors.
The base rate is usually determined by the freight class. Freight class is a standardized rating system developed by the National Motor Freight Traffic Association to categorize less-than-truckload (LTL) shipments based on various characteristics.
Essentially, the freight class spans an index range between 50 (densest, easiest to handle) to 500 (least dense, most difficult to handle). The lower the density, the chances of getting a lower freight rate will be higher and vice versa.
Each freight class will then have a corresponding NMFC (National Motor Freight Classification) code, which is a more specific identifier for individual commodities within a class to further determine a justified freight rate for a shipment. These codes are determined based on 4 main factors:
- Density
- Ease of handling
- Stowability
- Liability
Then it expands to the distance. The further the truck will need to travel to get the goods to be delivered, the more costly the freight rate will be.
Additional costs could include special requirements such as requesting a driver to perform additional tasks (e.g. collecting a proof of delivery) or if there’s a need for special handling if the item is fragile. Some carriers also provide expedited LTL freight options which will also factor in additional costs.
Advantages of Less Than Truckload (LTL) Shipping
The essence of how less-than-truckload (LTL) shipping works has made it a popular alternate option for shippers due to a couple of advantageous reasons:
LTL is a cost effective mode of shipping
Less-than-truckload (LTL) shipping essentially allows shippers to share the freight space with other shippers, which leads to reduced costs. This is especially ideal for shippers with smaller shipments as loading them all to a single truck would likely not justify the cost of it.
Shippers that don’t possess the capital to invest in their own trucks and drivers can also leverage the option of LTL freight to further save costs.
LTL freight offers flexibility
From a single pallet to several pallets, LTL freight caters to a wide range of shipment sizes, without requiring the need to fill an entire trailer which is perfect for businesses with fluctuating shipping needs.
LTL is a greener option
LTL freight is arguably more environmentally-friendly due to the fact that it’s an option that optimizes truck space by consolidating multiple shipments. In this way, there could be lesser trucks on the road which will lead to decreased carbon emissions.
Disadvantages of Less Than Truckload (LTL) Shipping
Like every freight mode, less-than-truckload (LTL) shipping is not perfect and has its disadvantages to consider too:
LTL shipping may not be the fastest
Freight trucks that are on LTL duty are transporting cargo from different shippers and will have to deliver them at multiple stops. This might increase the chances of having a delayed shipment if a particular set of goods will be delivered at the last stop, or if there are traffic jams in between stops.
Therefore, it’s not a freight mode particularly suitable for companies with frequent shipments that require a short lead time.
LTL does not provide as much cargo handling control for shippers
Due to the fact that less-than-truckload (LTL) shipments are a combination of different freight from different companies, shippers will only have limited control when it comes to handling freight.
The contracted freight forwarder or carrier will have to handle different shipments at multiple stops which may need the goods to be moved around more often than an FTL shipment. As a result, the chances of damage to the cargo could be potentially higher.
LTL may not be suitable for shipping oversized items or hazardous materials
Generally, less-than-truckload (LTL) shipments are more favorable for smaller shipments with a smaller volume and there may not be enough room for oversized cargo.
Freight forwarders and carriers will also very likely avoid the risk of shipping hazardous materials for an LTL shipment because the stakes of bearing responsibilities to compensate other companies involved in the same shipment are too high.
How to Optimize for Less Than Truckload (LTL) Shipping
LTL shipping might seem like another regular freight activity that helps to get a shipment from point A to B. But if it’s optimized to be more efficient and affordable, it can reduce freight costs and delivery times which leads to driving more value for the business. Here are some key strategies to consider:
Analyze LTL shipping needs
Each company’s shipping needs are different and it’s critical to understand them as much as possible - all the way from typical shipment sizes to frequency and destinations.
Companies can also dive deeper to see if there are shipping opportunities to consolidate across departments or product lines and review packaging practices to see if there's room to reduce weight or volume.
As supply chains are getting more complicated than before, more companies are adopting the use of transportation data analytics to measure long term and short term shipping needs.
Classify accurately
After determining a shipment size, the shipment will then need to be classified according to its relevant freight class and NMFC codes for each LTL freight. This is absolutely critical because misclassification can lead to higher costs or even delays.
Package & palletize efficiently
As goods in an LTL shipment tend to be moved around more often, it’s important to package them well to minimize wasted space and reduce the chances of damage to the goods.
It’s also wise to consider reusable packaging options for frequent shipments and environmental benefits. After palletizing them, it should be ensured that the goods are stacked efficiently to maximize truck space.
Compare LTL freight quotes
Never put all your eggs in one basket. There are countless providers out there that can provide LTL freight services so you should not settle for just one quote.
By sourcing for more competitive freight quotes, companies have more room to negotiate and increase their chances of saving on cost. While considering the best freight rate for a particular shipment, factors such as transit times, service reliability and accessorial charges are some of the attributes worth looking at.
Negotiate freight rates strategically
Freight rate negotiation is an art form and there could be so many nuances that can influence the success of each negotiation. A good starting point could be from shipment volume and consistency.
Many providers such as those from a 3PL and 4PL will favor an opportunity presenting consistent shipping frequency with high volume shipment. This is where they are more likely to offer a lower freight rate in exchange for a high frequency shipment opportunity. Usually, this is dealt through a freight contract.
Being flexible on factors such as pickup/delivery times or prepayment options can also help to secure a discounted rate in exchange. Be sure to also nurture the relationship with the providers upon every successful rate agreement to further increase the chances of getting better freight rates for the long term.
Analyze performance
Insights from the performance of each LTL shipment can reveal tons of valuable information that are important for optimization. Again, with a transportation analytics tool, companies should be able to track various key metrics such as transit times, damage rates, and costs per shipment to measure success and identify areas for improvement.
Stay informed
The supply chain industry is one of the most dynamic industries in the world so things related to LTL shipping can always change without you knowing soon enough. Therefore, keeping up with industry trends and changes in freight regulations or petrol costs can help provide more insights for companies to adapt an LTL freight strategy accordingly.
The Best Way to Manage Less Than Truckload (LTL) Freight
As you can see, there’s a lot going on in a single freight mode such as LTL and it is a real challenge for many supply chain professionals to make the best out of it, even today. This is why transportation management tools such as Cargobase TMS are developed to help navigate through the challenges by providing a holistic platform that enables complete control over every freight mode.
To find out further about how Cargobase TMS can help optimize your company’s LTL freight processes and more, be sure to contact us for more information.