Cargo is moved from one place to another through different transport modes such as ocean, air, rail, and road. Yet, regardless of these other avenues used in the transportation industry, freight brokers still need to figure out the best and most efficient way of moving their customers’ cargo as fast and as cost-efficiently as possible. In the United States, the truck trailer offers the most flexibility at a relatively low cost.
Most freight carriers in the United States offer two types of service: Full Truckload (FTL) and Less than Truckload (LTL). Full Truckload and Less-than-Truckload shipping can move goods of varying sizes faster than rail since it’s not dependent on the railroad’s delivery timetable. And while every FTL carrier moves full containers of one product from a single customer, LTL carriers move goods from multiple customers in a single truck. LTL carriers offer the customer more cost reductions than an FTL logistics provider. Below, we’ll look at the basics of LTL freight shipping and what freight brokers need to get out of it.
The Basics of LTL
Within a given geographical area, an LTL freight service provider has many trucks that collect shipments from shippers. After they finish their daily collection, these less than truckload shipments are taken to a central location where these vehicles are unloaded. Each shipment is weighed and rated, which initiates the customer billing process. Every individual shipment is loaded onto an outbound truck with shipments from other customers bound for the same area.
Outbound shipments are taken to their appropriate regional terminals where they are unloaded. They are further sorted and placed on other vehicles for final deliveries. As such, each shipment is handled several times from the moment it’s picked up from the shipper until it reaches its final delivery location.
LTL carriers can provide a wide range of specialized services that target a specific audience. Some such carriers may specialize in transporting hazardous materials, while others may be focused on freeze protection for produce or pharmaceuticals. There are also those that specialize in retail shipping or provide residential pickup, delivery, and white-glove services. Lastly, carriers may also differ in terms of size, like those that only operate in a small area to those that can ship goods nationwide.
Whichever the case, LTL providers combine loads from multiple shippers in a process known as “freight consolidation,” making it a more cost-effective solution than having to hire an entire truck for a relatively small load. Less-than-truckload shipping requires a fair degree of coordination and logistics planning to ensure maximum profitability. Transportation management systems, automation tools, and other digital technologies are crucial for freight brokers, shippers, carriers, third-party logistics providers, and other stakeholders within the supply chain.
The Specifics of LTL
LTL shipping specifics depend on several variables such as the shipment’s place of origin, destination, packaging type, weight, number of pieces, and whether there is a need for special handling. It’s also important to mention that trucks also vary in capacity from 16 feet (around 800 cubic feet) to 26 feet (about 1,400 cubic feet), which indicates the importance of cargo size as well.
The majority of carriers have their own rules and shipping terms regarding the dimensions and limits of LTL freight. In general, LTL refers to shipments between 150 and 15,000 pounds. Loads that fall under 150 pounds are generally considered packages and fall under the care of parcel service carriers such as UPS, FedEx Ground, or the US mail service.
Individual LTL shipments occupy less than 24 feet in a truck trailer and will not consist of more than six pallets. LTL shipments are transported on wooden or plastic flat stands that measure somewhere around 48” x 40”. To increase freight security and make more efficient use of space, individual packages are often shrink-wrapped together to create a single package.
Aside from a shared trailer space, LTL is also defined generally by the hub and spoke transportation model. This model is built with local terminals that act as the spokes on a wheel that connects to the distribution center as the main hub. Trucks load their freight at these local terminals and move it to the hub where goods are redistributed, consolidated, and delivered directly to their destinations.
The Pros and Cons of Less-than-Truckload
One of the main benefits of LTL shipping boils down to the freight cost reductions. Shippers looking to book an LTL shipment will only be paying for the portion of the trailer used. The rest of the transportation cost is covered by the other freight shippers that take up the trailer space. This often translates to freight brokerages with higher margins when compared to different transportation modes, such as FTL, for example. Furthermore, the NMFTA also regulates and standardizes freight rates, while market factors dictate actual trucking pricing.
Also, most LTL shipments are packaged together onto pallets before being loaded onto a truck. These shrink-wrapped pallets have a better chance of remaining secure during transit than with a parcel carrier. With these safety measures, freight brokers will have fewer customer complaints regarding the conditions of their arrived shipments. LTL also offers more specialized services such as lift gates as well as inside freight pickup and delivery. Lastly, most reputable LTL carriers offer tracking capabilities through their bill of lading, PO number, shipment reference number, pick-up date range, to name a few.
However, one of the primary considerations when it comes to the LTL shipping process is the transit time. In general, it takes longer to plan, organize, and prepare all of the goods for shipping. As such, the shipment will take, on average, longer to arrive at its destination since the truck should be at total capacity before it leaves. It may also not be a direct route to a particular destination, as is the case with FTL. Depending on the total number of stops and transfers, LTL also involves more freight handling, which increases the risk of damage or misplacement.
What Factors Determine LTL Shipping Rates
- Location: In general, the further the distance, the higher the freight rate.
- Dimensions: The dimensions, weight, and density of the shipment help determine the freight class, which directly impacts shipping rates.
- Mode: LTL shipments can also be expedited, typically for additional accessorial charges.
- Type of freight: A load that needs special handling or equipment (perishables, fragile, hazardous items) will likely lead to higher freight costs for the business owner.
Less-than-Truckload in the E-Commerce Era
Less-than-truckload shipping services have gained increasing importance in the economy in recent years. With the rise of eCommerce, quick shipments of products are imperative for online businesses competing for sales, not only between themselves but also with brick-and-mortar retailers. Today’s business environment has proven to be an excellent time for LTL carriers. Unlike their FTL counterparts where pricing discipline is scant because of ease of market entry, the top 10 LTL carriers control around three-quarters of the entire $43.6 billion market.
That said, in today’s highly volatile and uncertain business and geopolitical environment, truck availability and shipping rates can change at a moment’s notice. Both business owners and freight brokers should prepare for a wide range of scenarios. System and process flexibility help keep shipments moving consistently despite the external factors that may be adding to the complexity of the situation.
One of the key strategies for freight brokers moving forward is to keep their carrier options open and build their LTL carrier network. While fewer such strategic partners may result in fewer emails and phone calls, it can also imply limited booking availability and less flexibility. By casting a wider net over a more extensive network of LTL carrier partners, freight brokers can book freight shipments that better fit their clients’ dates and budgets.
In addition, a Transportation Management System (TMS) can also bring a sizable bottom-line value to the table. These systems can plug directly into the existing software infrastructure and resources, bringing time-saving, scalability, billing consolidation, and simplified shipment tracking benefits, among others.
One such system is Tai Software. Built specifically for freight brokers, this transportation management software is all about scale. For logistics service providers to remain competitive on the market nowadays, they need to make use of automation that connects them to their system, schedules, routes, and makes the entire process much more manageable. Tai TMS also uses a powerful self-service client portal to organize your freight rates into a single convenient platform.
Aside from its comprehensive booking capabilities, this transportation management software also provides automation to freight brokers in API and EDI carrier integration. This gives insights and complete control over the entire shipment lifecycle. Automated dispatching and tracking can move freight from start to finish without the need for any manual intervention. Carrier updates are also fed directly into the system’s activity log, making it quick and easy for on-demand customer updates.
Put simply, Tai Software is a logistics industry solution that addresses every aspect of the shipment lifecycle, making it a great TMS software platform for freight brokers. With a dedicated team of logistics software experts with over 20 years of freight software experience, our team is here to ensure your success. Request a free demo today!