Sometimes it’s important to slow down from the speed of the supply chain to focus on the basics. Here is your quick guide to less-than-truckload (LTL) freight. With LTL freight, the shipper pays only for the space their shipment occupies on a truck rather than the entire truck’s cost, making it a more cost-effective option for smaller loads.
LTL freight consolidates multiple shipments from different shipping locations into one truck for transportation. LTL freight is used when a load is too large for parcel delivery but not enough to require an entire truck. Shipments are typically consolidated at a terminal (or various terminals) and sorted based on the final destination.
A key service of 3PL providers is managing an LTL freight network. A 3PL’s relationships with LTL carriers are critical in the service of shippers and manufacturers.
National vs Regional LTL Carriers
National and regional LTL carriers are two types of freight carriers that offer similar services but have some significant differences.
National LTL carriers have an extensive network of terminals and trucks that operate across the country, enabling them to transport freight to almost any destination within the United States. These carriers typically have more resources and capabilities than regional carriers, such as a larger fleet of trucks and a more comprehensive range of services, including expedited and guaranteed delivery options. National carriers also tend to have higher shipping volumes, which can result in more frequent pickups and deliveries.
In contrast, regional LTL carriers have a smaller operating area, typically covering a specific region or group of states. They may have fewer terminals and trucks than national carriers, but they offer more localized service and can provide more personalized attention to their customers. Regional carriers often have faster transit times within their service area and can offer more flexible scheduling options for pickups and deliveries.
Both national and regional LTL freight carriers can provide direct and indirect service. Direct service indicates that the shipment will remain on the carrier’s trailers until final delivery. However, the carrier may use a partner carrier for the “final mile” or last leg of delivery. Indirect service implies that the shipment will transfer across different carriers, also known as an interline shipment.
LTL freight inherently results in longer transit times than full truckload services. LTL transit times are always an estimate provided by the carrier, as multiple delaying factors can occur. It’s helpful to remember that rural deliveries often involve indirect service, which means an extended transit time.
There can also be a technology gap between national LTL carriers and regional LTL carriers; national carriers typically have more advanced technology capabilities and resources due to their larger size and scale. National LTL carriers usually have more sophisticated technology, including advanced transportation management systems (TMS), real-time shipment tracking, and automated shipment processing. They may also have more robust data analytics and reporting capabilities, which can help optimize shipping operations and improve overall efficiency.
In contrast, regional LTL carriers may have limited technology resources, with fewer advanced TMS systems and tracking capabilities. They may also rely more on manual processes, which can be less efficient and more prone to errors.
However, this technology gap is narrowing as regional carriers increasingly invest in technology to remain competitive and improve their services. Many regional carriers are implementing TMS and other advanced technologies to streamline operations and provide more reliable, efficient shipping services.
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LTL Freight Pricing Strategies
Both national and regional LTL carriers typically offer two types of pricing options for shipping: universal pricing and customer-specific pricing (CSP).
Universal pricing, also known as blanket pricing, is a standardized rate for LTL freight that applies to all customers. This rate is typically based on the shipment’s weight, dimensions, and distance. Universal pricing allows carriers to set consistent rates across their entire network, regardless of the customer’s location or shipping volume.
In contrast, customer-specific pricing, also known as negotiated pricing or contract pricing, is a customized rate that is arranged for the individual customer. This rate is based on shipping volume, frequency, routes, and the relationship between the shipper or 3PL provider and the carrier. Customer-specific pricing may be lower than universal pricing for high-volume customers or customers with consistent shipping patterns. 3PL providers can select the most appropriate national and regional LTL carriers for a shipper or manufacturer and negotiate the pricing with the carrier.
Dynamic pricing is a pricing strategy that some LTL carriers use to adjust rates based on current market conditions and demand. Unlike universal or customer-specific pricing, which typically remains fixed for a set period, dynamic pricing can change in real time based on fuel prices, capacity utilization, and market demand. Dynamic pricing allows LTL carriers to respond quickly to changes in the market and adjust rates to optimize their revenue and profitability. For example, carriers with excess capacity on a particular route may lower their rates to attract more shippers and fill their trucks. Conversely, if demand exceeds capacity, the carrier may increase its rates to maximize its revenue.
Dynamic pricing with LTL freight can benefit both carriers and shippers. Carriers can optimize their revenue by adjusting rates based on current market conditions. At the same time, shippers can take advantage of lower rates during periods of low demand or negotiate better rates during peak shipping seasons.
However, dynamic pricing can also create uncertainty for shippers, as rates can fluctuate quickly and without warning. To mitigate this risk, shippers may need to closely monitor market conditions and work closely with their carriers to negotiate stable shipment pricing. The right 3PL provider will understand your business objectives and work with you to solidify an LTL pricing strategy.
Accessorials and LTL Management
Accessorials are services or charges added to an LTL shipment beyond the base rate. LTL carriers typically offer these services to provide additional value or accommodate specific shipping needs. Accessorials can vary by carrier. 3PL providers can negotiate accessorial fees as part of the pricing agreement.
Common LTL accessorials include:
- Liftgate Service: This specialized service uses a hydraulic lift to load or unload shipments from the back of a truck, typically used when a shipping location does not have a loading dock or equipment to unload.
- Inside Delivery: This service involves the carrier delivering the shipment inside the recipient’s building or room, beyond the standard dock or curbside delivery.
- Residential Delivery: This service involves the delivery of a shipment to any portion of a property with a residential building, which may require specialized equipment or personnel.
- Oversize or Overweight Freight: This service involves additional charges for shipments that exceed standard size or weight limits.
- Hazardous Materials: This service involves additional charges and specialized handling requirements for shipments that contain hazardous materials.
- Appointment Delivery: This service involves scheduling a specific delivery window to ensure someone can receive the shipment.
- Storage-In-Transit: This service involves the carrier storing the shipment temporarily before final delivery.
- Limited Access Delivery: This service involves delivery to locations that are difficult to access, such as military bases, airports, construction sites, or other like locations.
Applying the appropriate accessorial(s) upfront is essential to avoid unexpected charges after delivery of LTL freight. The cost of accessorials can impact carrier selection for a load.
There are ways that shippers and manufacturers can be proactive when it comes to accessorial fees. Here are some ways to avoid or minimize accessorial expenses when shipping LTL:
- Plan ahead: Communicate your shipping needs with the carrier or your 3PL provider. Know what services are required for the shipment and confirm that the carrier can accommodate those needs before scheduling the shipment.
- Choose the suitable carrier: Select a carrier specializing in the shipment type being sent, with experience handling specific accessorial services. Some carriers may offer better rates or include certain accessorial services in the base rate, so shopping around and comparing options is essential. This is an area your 3PL provider can offer much value.
- Optimize shipment packaging: Properly package and label LTL freight according to the carrier’s requirements. This can reduce the need for additional services such as liftgate service, inside delivery, or special handling fees.
- Avoid residential addresses: Whenever possible, ship LTL freight to commercial or business addresses instead of residential addresses, as residential deliveries often require additional fees for specialized equipment and personnel.
- Avoid limited access locations: Avoid shipping to locations that are difficult to access, such as construction sites, military bases, or airports, as these locations may require additional fees for limited access delivery.
- Use standard size and weight: Ensure that the shipment complies with standard size and weight limits, as oversize or overweight shipments may incur additional charges. A certified scale can go a long way in avoiding costly LTL freight reweigh charges.
- Optimize loading and unloading: Minimize the time required for loading and unloading by having the shipment adequately prepared and ready for pick up and ensure adequate space and equipment for efficient loading and unloading.
Shippers can minimize accessorial fees when shipping LTL freight by following these tips, reducing shipping costs and improving profitability.
This guide is the start of understanding the language of LTL freight management.
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