Less-Than-Truckload (LTL) freight typically consists of shipments ranging from 150 lbs to 10,000 lbs, consists of 6 or fewer standard (40”x48”) pallets, and takes up less than 12 feet of a truck.
It is typically more cost effective to ship items less than 150 lbs by a small parcel carrier like UPS or FedEx unless the article is unusually large and would be transported more safely secured to a pallet. However, dimensional pricing in small parcel has blurred the 150 lb standard a bit. One may wish to compare the small parcel carrier pricing and transit times to that of an LTL carrier if uncertain.
On the other end of the spectrum, if your shipment consists of more than 6 pallets, takes up more than 12 ft of truck or weighs greater than 10,000 lbs, you may consider a volume or truckload (FTL – Full Truckload) option.
One major difference between a truckload and LTL carrier is that in most cases, truckload carriers operate door-to-door which is why they are often referred to as “Dedicated” carriers.
LTL carriers use a Hub and Spoke approach to moving freight around the country. If you are shipping from the East coast to the West coast, it is likely your freight could be offloaded and reloaded onto multiple trucks at various terminals as it progresses across the country.
Each time your freight is touched by a forklift, there is inherent risk in damage! This leads to the next step to shipping LTL freight correctly.
Common LTL Carriers
Number 2 - Is your freight LTL ready?
Imagine the handling of your luggage while you run to your connecting flight. Thrown onto one conveyor, picked up and thrown in a box car, multiple other bags thrown on top… then picked up, thrown on another cart, taken to the next plane … thrown on a conveyor and then thrown again in a pile of bags in the belly of a second plane… only to go through this again when it gets to the destination where you finally hope to receive it in one piece.
Now imagine a terminal with trucks backed up to as many as 100 docks; it’s not too different. Forklifts flying in and out of trailers; scanning a shipment and racing it to the next trailer. The faster the trailers are unloaded and loaded the lower the cost to the carrier.
That means your shipment better be ready for wear.
- Secure it with shrink wrap – do not skimp. It should be tight enough to have little to no risk of toppling while moved on a forklift.
- Consider whether or not crating is warranted
- How fragile is the freight?
- Is the product high value?
- Is the commodity excessively heavy?
- Crating alone could cost as much as $50-$150. The additional weight will also add to your freight cost.
Determine whether the shipment fits on the pallet:
- Item 680 is a rule in most LTL Carrier Rules Tariffs that allows a carrier to adjust the freight class if the shipment does not cover 65% of the surface area of the pallet which can significantly change the rate of a shipment.
Labeling is critical to assisting your LTL carrier in getting your freight to your desired destination.
- Stacked, shrink-wrapped boxes – Label each box as well as each side of the pallet.
- Crate – Label each side of the crate
- Include a barcoded, pre-authorized PRO number on labels when available (See TMS)
Number 3 - LTL Carrier Procurement
Before choosing a carrier, it is important to consider how you are going to work with the carrier. There are various options depending on the nature of your freight and capacity of your team.
1) Freight Broker – Typically best when LTL spend is less than $100,000.
There are a number of companies that have significant enough volume that carriers will offer them “blanket” pricing for them to resell to their clients. What may cost the broker $100 will be billed to the shipper at $150, or whatever the broker feels they can charge.
Carriers have become increasingly more selective of the firms to whom they offer this sort of blanket pricing. The firm better offer more value to the shipper and carrier than just a cheap rate, otherwise, the carrier is simply competing with itself.
The broker must remove burden from the shipper; here are the pros to using a broker:
- Assist the shipper in confirming the freight is carrier ready
- Provide an accurate and complete Bill of Lading
- Dispatch the carrier and confirm timely pickup
- Fair, accurate rate from a variety of carriers
- Deal with damage claims on behalf of shipper
- Audit and pay carrier.
Cons to using a Broker:
- Disconnected from carrier
- May delay information on shipment
- No relationship with carrier
- No input on selection of carrier
- No transparency
- What is the broker profit margin… 10% or 50%? More?
- How would you know of an increase?
- If the broker does not pay the carrier, the carrier will come to the shipper for payment regardless if the shipper paid the broker.
2) Direct Pricing with the Carrier – Consider when LTL spend is greater than $100,000.
A spend in excess of $100,000 is enough for a carrier to take your firm seriously, but that does not guarantee they will treat you accordingly.
LTL freight pricing is complicated. Carrier sales representatives can tell immediately if the person they are negotiating pricing with is informed… or not. And if not, it could lead to a difference in cost of anywhere from 15% to 60%.
In addition to expertise in LTL pricing, your firm will need to have the capacity to manage shipping exceptions. LTL carriers are adding accessorial (service) charges constantly and the rate you are quoted, may not always be the rate you are charged.
Does your firm have the resources to inquire why the rate changed? What if your freight is supposed to be in Chicago, but for some reason finds its way to Miami? Does your team have the bandwidth to deal with that?
If your firm does not have an expert in LTL pricing on staff, nor the time to deal with the regular exceptions that inevitably present themselves on a daily / weekly basis, you may wish to consider #3… partner with a 3rd party.
3) Partner with a Third Party – May require a spend of greater than $200,000 to $250,000.
Not all third parties are the same; some may suggest an ability to help with all the burdens of LTL freight, but lack transparency or the flexibility needed to mold to your particular business demands.
If you are looking for an expert and tools to help you along the way, the option is out there; however, you must be careful the third party expert is not simply a broker in disguise.
Brokers may offer value in terms of removing much of the burden from your team, but the biggest differences are:
- Broker owns the pricing agreements
- You will rarely, if ever, see a carrier freight invoice from a broker
- Shipper pays the broker, broker pays the carrier
- Very little flexibility in communicating with carriers.
- Data availability can be complicated; often hard to gather complete shipment level detail
This is not to suggest brokers are inherently bad; for shippers of a certain size (less than $100,000 annual spend), a trustworthy freight broker can be invaluable.
A trusted third party can offer a variety of tools in addition to expertise so you can choose your level of interaction with carriers. Shippers who can take advantage of this model typically have talent on hand who either want to shift the burden to the third party or simply get help to do it better.
If desired, the third party could:
- Negotiate LTL pricing agreements with national or regional LTL carriers
- Provide current technology (TMS -Transportation Management System)
- Provide reporting and analytics at your fingertips
- Route inbound freight
- Integrate with ERP, WMS, E-Commerce platforms
- Audit and pay bills
- Assist in route optimization
- Deal with blocking and tackling of exceptions
- Adjust, if any of the above are NOT desired.
Number 4 - Understand your Freight Characteristics
Whether using a broker, third party, or working directly with carriers, it is critical to keep up with the characteristics of your freight.
Freight pricing is more related to Carrier Cost Drivers than ever. The better the detail you provide carriers in your request for pricing, the less risk the carrier has when issuing rates. Details that must be included:
- Where is the freight coming from, going to, and how frequently?
- Length of line haul is a critical cost driver for carriers.
- How many shipments (Bills of Lading – BOLs) should the carrier expect at each pickup?
- More BOLs equals more revenue per pickup for the carrier.
What products are you shipping; broken down by Freight Class?
- Are they density based? Can a breakdown of density be provided?
- Commonly used NMFCs
How much does your freight weigh?
- Average weight of a shipment
- Do you have a regularly calibrated scale?
What accessorials are you using and how frequently?
- Lift gates, inside delivery, residential, limited access, etc.
- Carriers may or may not want to deal with these; always better to avoid surprises, like a $160 lift gate.
How nicely can a carrier stow your freight and is it easily damaged?
- Are there oddly sized pallets?
- Can they be stacked?
- Can you provide photos?
Number 5 - Prepare a LTL shipment
At this point, your shipment is ready. Your product is stacked nicely and is well protected, most likely on a pallet and ready for a carrier to pick up.
But there are some details to cover before requesting the truck. You need an efficient method of carrier selection and you will need to prepare the appropriate shipping documents for the carrier.
Let’s skip to the latter (shipping documents) here and in the next section we will discuss carrier selection thoroughly.
What is a Bill of Lading? – A Bill of Lading (BOL) serves a few purposes. First, it acts as a receipt of the freight services provided. It is also a contract between the carrier and the shipper outlining the services to be “delivered” and how those services will be paid for.
The BOL Includes:
- Origin and Destination information
- Addresses with contact information
- Dock hours for pickup and delivery
- Carrier details
- PRO # – tracking number
- At times a carrier pickup number is included
- Ship date – Pickup date
- Shipment details
- Freight Class and NMFC description of each product – What are you shipping?
- Quantity (pallets, boxes, pieces, etc) and weight of each
- Total weight
- Density where dimensions are available
- Hazmat details when applicable
- Freight Terms (see our Guide) – Who pays the carrier / Who receives the invoice?
- Freight prepaid – paid by shipper
- Freight collect – paid by consignee
- Third party – paid by an entity other than shipper or consignee (could be a drop shipment to a customer)
- Accessorials – What services are required for delivery?
- Lift gate
- Limited access – church, school, military base, etc.
- Inside delivery
- Delivery notification or appointment needed
- Special instructions – anything the carrier needs to know to make pickup or delivery
- Shipper and carrier signature
Number 6 - Rate, Dispatch, Track and Audit my freight
Cost no longer prohibits shippers from accessing sufficient technology to manage freight. A good broker would have technology available for their clients to view their shipments. If a shipper wanted to work directly with carriers on their own, Transportation Management Software (TMS) can be found for as little as $100 per month depending upon the number of shipments created or, at times, the number of users.
A solid third party logistics partner should have technology available as well, but in this case, a shipper can expect flexibility to act as they need.
Regardless of where secured, a TMS should:
- Rate shipments on multiple carriers on one screen
- Produce BOLs
A more advanced TMS should also:
- Produce shipping labels with pre-assigned carrier PRO #s
- Automatically dispatch carriers
- Provide frequently updated / real time shipment tracking
- Audit details of the shipment
- Provide advanced shipping notices and delivery notifications
- Offer detailed load reporting
- Track and report on carrier performance
- Provide a visual image of the destination
Number 7 - Accountability - Reporting and Analytics
As this guide demonstrates, LTL Freight involves numerous variables, all of which can lead to exceptions and mistakes that ultimately add to cost.
Today’s shippers needs tools to get a snapshot of how well their team, their third party provider, or their carrier is performing.
Reporting and Metrics should:
Demonstrate cost trends based on cost per pound
Because it is rare that two LTL shipments are identical, cost per pound is typically considered the best metric to measure your LTL freight cost over time. It is important to have the relevant data points available that impact cost per pound. An increase in your average cost per pound does not necessarily mean your carrier raised your rates.
Impact on cost per pound:
- Average distance traveled – As distance goes up, cost per pound goes up.
- Average weight – As weight goes up, cost per pound goes down.
- Average freight class – As class goes up, cost per pound goes up.
- Accessorial usage – Use additional services, cost per pound goes up.
Cost per pound or Total Cost can be used to view cost trends by:
- And more
Highlight whether or not we are using the Low Cost Carrier and if not, what is it costing us?
A good TMS can report on Low Cost Carrier selection. A great TMS can require a logged reason for not using the Low Cost Carrier.
Present a snapshot of carrier performance
Shippers need to make informed decisions. When a vendor tells you to ship on a more expensive carrier because the lower cost carrier keeps delivering late, you need to make an informed decision. How often is that carrier really delivering late? And how much is that going to cost you?
Carrier Performance Metrics
- Late deliveries
- Missed Pickups
- Missed Appointments
Present opportunities for reducing cost outside of rates
Rates are always low hanging fruit and always talked about, but data and metrics can highlight numerous ways to Ship Smarter!
Non-rate related savings opportunities
- Do we ship multiple times to the same place on the same day/week?
- Do we select the right mode for what we are shipping?
- Do we know our freight class is changing? And if so… why??
- Are we using services we are paying for?
- What is causing a change from the quoted rate to the invoiced rate?
Give you the best chance to reduce carriers’ risk in offering you contracted pricing.
As discussed before, you need data for the carriers to bid on your freight.
Are you ready to start shipping LTL Freight?
It may be complicated navigating the LTL world; you may look at 3PLs, brokers, and consultants and ask yourself, “How in the world can I differentiate when they all appear to do the same thing?”
It’s not an easy answer, but we have found the great differentiator lies in two areas.
- Control – Who ultimately makes the decisions on carriers, exception disputes, payment, etc.?
- Transparency – Is your partner transparent in pricing, carrier interactions, data availability, etc.?
If your firm is small, short-staffed and you simply want to get the burden off your hands, maybe a broker is right for you. You may not have the control over the carrier relationship and you may have to trust the agent is acting in your best interest, but at least you save a significant amount of time. Just be sure you have the all in cost up front.
Meanwhile, as you get larger and value the clarity of the details behind your freight, control and transparency will become more important.
“Control” allows you to determine what is best for your business even when it might conflict with “best practices.” Control allows you to …
- … make the specific carrier selection based on your rules.
- … communicate directly with the carrier on issues important to you.
- … choose who pays the carrier and when to pay them.
- … describe your freight on the BOL how you choose.
“Transparency” alleviates the potential for surprises. Most importantly, knowing your freight cost and knowing your third party’s cost.
Having access to freight bills and knowing the carrier cost prevents hidden increases that may otherwise go unnoticed. The biggest fear of working with a broker is being sold a % savings, but not knowing that 3 weeks later, their margin increased X% and that savings is now ½ what it was. It keeps you in a constant state of quoting… that ultimately counters the value of the reduction in burden.
Transparency allows you to …
- … know the cost of freight vs. cost of third party service
- … have access to ALL data at your fingertips
- Too frequently, a third party, when requested, will provide data with a key point missing, like freight class or weight. It’s a sneaky way of avoiding accountability.
- … have access to freight tariffs and pricing agreements
- … have access to freight invoices
The fundamentals shared in this “Guide to Shipping LTL Freight” will get you off to a good start in using the Less-than-Truckload mode of transportation. One reality you will find as you get started is that the LTL business is ever-changing. What works for your firm today, could change tomorrow. What works for carrier X today, may also change. Be sure to subscribe to updates to limit your surprises.
Can’t get enough?
Take a look at some of our Resources and Updates content on our Blog
Consider reviewing available downloadable tools from our Freight Resources page.