Also sometimes referred to as less-than-load, less-than-truckload (LTL) shipping is a type of shipping service that caters to relatively small loads. LTL services are offered by numerous providers, either large, national carriers or even specialized logistics providers.
LTL is a middle-of-the-road service that can accommodate the shipping needs of multiple businesses that regularly transport batches of goods. LTL carriers offer their customers economies of scale so that the freight costs of individual shipments are kept at a minimum.
According to the Bureau of Transpiration Statistics, there will be a 44% increase in the weight of goods transported via truck in the United States from 2015 to 2045. At the same time, the value of these goods will also increase throughout this period by 84%, going from $13.2 trillion to over $24.4 trillion.
Given these numbers, it should not come as a surprise that the US LTL freight market is also increasing at a steady pace. In 2019, the LTL market was at $77.62 billion, growing to $78.91 billion in 2020 and is estimated to reach $80.16 billion in 2021.
This guide will look at the basics of less than truckload shipping, what it is and how to use it. We will also cover the risks and benefits of LTL freight services compared to full-truckload shipments and what goes into freight classification and freight rates.
What Are The Basics of LTL?
A wholesaler will, most likely, not want to be running low on their inventory before they order more. They’ll want to be able to continue selling for as long as possible without worrying about running out of stock and missing out on a potential sale. This is one of the scenarios where less than truckload (LTL) shipping comes in handy.
By shipping fewer products more frequently, they can help mitigate the risk of potential lost sales due to not having enough of a product for customers. While the shipping costs tend to be somewhat higher and the transit times a bit longer than in the cases with FTL, less than truckload shipping can be less expensive in the long run, mainly since it can prevent inventory shortages like in the example, we’ve just provided.
Businesses that offer LTL tend to range from specialized service providers who cater to a niche audience, like a carrier that only operates in and around a specific metropolitan area, to national transportation companies capable of shipping freight from coast to coast.
In either case, LTL providers combine loads from multiple shippers to fill an entire trailer. This makes it a more cost-effective option overall than hiring an entire truck for a small-to-medium load. Nevertheless, less than truckload shipping requires a fair degree more complexity, coordination, and sophistication than is the case with FTL. Digital technologies are a critical part of the whole as they ensure that all stakeholders within the supply chain are well informed and aware of all that’s going on in real-time.
How LTL Shipping Works
In general, less than truckload refers to individual shipments that fall between 150 and 15,000 to 20,000 pounds. Loads that fall under 150 pounds are considered single packages and are typically handled by parcel carriers such as UPS, FedEx Ground, or the US Mail. LTL shipments will occupy less than the entire 24 feet of a truck trailer and typically do not consist of more than six pallets.
Aside from sharing trailer space, LTL shipping is also recognizable through the transportation model that it operates on. Known as the hub and spoke model, this is where shipments are loaded onto the truck at their point of origin and shipped initially to a regional distribution center (hub). Here, the cargo is loaded onto a different truck trailer, where it’s transported to a second regional hub. From this second distribution center, the shipment is sent to its final destination.
While more complex and more time-consuming than an FTL point-to-point transportation model, where a shipment is loaded at its point of origin and is transported directly to its final destination, the hub-and-spoke model helps keep the costs down.
The Differences Between LTL and FTL
One of the best and easiest ways of understanding LTL freight shipping is by comparing it to FTL. The main differences between these two transportation modes boil down to three main key areas. These include the following:
Shipment Size and Weight
- There are between one to ten pallets per shipment, which can weigh from 150 to 15,000 lbs.
- A full truckload represents a maximum of 26 pallets and can weigh anywhere from 5,000 lbs. up to 45,000 lbs.
- Unites your shipment with shipments from other shippers
- An LTL shipment will stop at several terminals on the way to its final destination.
- Your cargo might be handled multiple times as it is transferred to different trucks while on its way to the drop-off point.
- Only a single shipment is loaded onto the truck.
- A truck picks up your shipment at the origin and directly proceeds to the destination, with no transfers in-between.
- Your freight never leaves the trailer until it reaches its destination.
- A classification system for LTL freight was created by the National Motor Freight Traffic Association (NMFTA).
- LTL rates are determined by the commodity type, density of the cargo being moved, and how difficult it is to move.
- Each carrier has its own rates depending on the distance it is traveling, the weight and volume of what is being shipped, and any accessories that may be needed.
- FTL is directly tied to the supply and demand in the market
- FTL price can be negotiated with the carrier.
- Shipment prices can vary significantly from a single-truck operator to a huge trucking company with an extensive fleet.
The Pros and Cons of LTL Freight Shipping
While the main benefits of LTL freight shipping revolve around costs through economies of scale, there are several other bonuses as well as a couple of disadvantages to less than truckload transportation. Among the main benefits, we can include:
Cost-efficient: LTL shipping doesn’t fit the whole trailer and focuses on smaller loads that may come in containers with a few other pieces of cargo from other shippers. You only pay for the space you use, so if your cargo doesn’t fill up an entire trailer, then it’s priced accordingly. Most carriers also provide specialized handling to more fragile or hazardous shipments at reasonable prices. What is more, the NMFTA does regulate and standardize rates; regular trucking pricing, on the other hand, depends entirely on supply and demand.
Ability to ship smaller quantities: Large inventory regulations and the logistical challenges of storing large amounts can be a massive hurdle for any small business, even causing them to miss out on sales. To maintain an active and profitable supply chain, you must use LTL shipping as soon as your production starts.
Increased security: A well-packaged pallet is essential for securing goods in an LTL shipment to reduce the chances of damage. As long as the cargo is well-packaged, there are minimal chances that something will happen to it.
Easy to track: LTL shipments can be tracked by keeping an eye on the shipping number, PRO number, PO number, and pick-up date range from the bill of lading.
Environmentally-friendly: By using LTL shipping, there will be fewer trucks on the road, which will help save money and lower the company’s carbon footprint.
The main drawback of LTL freight instead of FTL is in regards to time. On average, it takes longer to plan, organize, prepare, and transport an LTL shipment to its final destination. Depending on how many stops and transfers there are, LTL will also involve more freight handling, increasing the possibility of goods becoming damaged or lost.
What’s A LTL Freight Quote?
A freight quote is an estimate of the cost to ship cargo, including weight, dimensions, type of product being imported.
You’ll need four pieces of information for every LTL freight quote:
- The total weight of the shipment and its packaging.
- The freight class
- The cargo’s pickup address.
- The drop-off address.
LTL shipping is primarily used for business transactions meaning that it must go from the customer to a business or vice versa. That’s why it’s also known as “dock-to-dock” transportation since it’s a shipment that’s primarily between two businesses.
If the recipient or sender of an LTL shipment is in a residence, additional fees will also be necessary. If the shipping dock cannot be used or it doesn’t exist, you will also need to pay for a vehicle that’s fitted with a lift gate.
What Are LTL Shipping Accessorials?
As mentioned above, less than truckload shipping includes the ability to customize your order with additional services that cover your needs. As is the case with any service, these will add costs and should be chosen carefully with what they provide for you. Among these services, we can include the following:
Expedited Shipping – Compared to FTL shipping, LTL is a bit slower given the added complexity of the hub-and-spoke model it operates under. If you need to get goods in a hurry, look for an expedited shipping service as this will negate this problem – for an additional fee, of course.
Inside Pickup and Delivery – If the driver will have to walk into a building to get your freight from you, or unload it at its destination, ask for this particular service.
Lift Gate – This option is for cargo that weighs more than 100 pounds, and the pickup or delivery location does not have a loading bay or dock where the shipment can be loaded/unloaded directly (for example, some small supermarkets).
Limited Access – This service is needed if the LTL freight carrier will have difficulty accessing specific destinations like construction sites, far away rural areas, or construction sites.
What Goes Into LTL Freight Rates?
Another factor that’s more complex for LTL shipping when compared to FTL is the freight rates that carriers charge. LTL freight rate is typically based on the weight of freight and the size of the shipment.
This is a significant factor in LTL shipping because without knowing what they’ll cost, you can’t calculate how much your shipment will cost in total. While multiple factors go into calculating LTL freight rates, certain factors are most commonly used. Among these, we can include:
Freight Class – Freight classification is a process that is done to identify the type of cargo and its weight. Several freight classes are used for less than truckload shipping which ranges from 50 to 500. The freight class is primarily based on the shipment’s density (weight/volume). However, in certain circumstances, it can also include the cargo’s stowability, liability, and difficulty of handling. This can include, among other things, goods that are fragile, perishable, or hazardous.
Distance to Destination – Another important factor about LTL is the distance to the destination, which also affects the shipping costs. This means that the farther your shipment has to travel, the higher rates will be on your LTL freight.
Accessorials – Any of the accessorials mentioned above will increase the freight rate if they are to be used.
Base Rates – Every LTL carrier will have its base rate, which is quoted per hundredweight (CWT) or 100 pounds. In general, carriers will change their base rates in accordance with their need for extra volume or increase in gross cost for certain lanes that have enough available trucks. Shippers can negotiate and agree on the base rate before shipping, or they can use one of these pricing models: Flat Rate, Per Ton Mile, Percent Loaded Miles, Cost per Pound Point Calculated by Distance.
Fuel Surcharge – The fuel surcharge is calculated as a percentage of the monthly base rate and is added to freight bills from LTL freight carriers. This varies depending on the average cost of fuel, but it is usually passed down to cover for operational costs.
Preparing the LTL Freight Shipment
Damaged or lost freight is a potentially time-consuming and expensive problem for shippers who use less than truckload shipping. Below are several things that you can prioritize in preparing shipments, so they arrive in pristine condition at their destination.
Packaging and Labeling
Shipments should be placed in crates or on pallets for easy shipment. They should also be appropriately labeled. Smaller items are typically sent in a crate and heavier, bulkier material is packaged on pallets.
Items should also be stacked accordingly; the heavier ones are on the bottom while the lighter ones are on top. Proper packaging helps prevent any damages to the cargo during transit.
Round off the dimensions of your package to the next inch. Your time and energy will be saved in the long run by accurately measuring your dimensions for shipping.
One of the most critical documents for truckload shipping is the bill of lading (BOL) from the carrier. The BOL serves as the contract and includes all relevant details about a shipment. To ensure the process is carried out effectively, your carrier will need a copy of the bill of lading.
Avoiding Delivery Delays
Shippers must track LTL shipments because there is a higher chance of delays happening than is the case with FTL. There are also more risks with LTL shipping, with the probability of slowdowns and missed deliveries. Aside from the points mentioned above regarding packaging, measuring, and documentation, shippers can also do the following to further decrease the chance of any delays.
- Accurate BOL Information – Shipping bills of lading contain vital information about the shipment such as its contents, pickup and delivery address, contact information, transit times, billing information, and more. The inaccuracy of any of this vital information can lead to delays or additional fees regarding returned or misdelivered shipments.
- Provide Lead Times – Don’t rely on the given delivery date as a guarantee. Shipments can be delayed due to various unforeseen events and circumstances such as freak weather, roadside accidents, and more. Providing yourself with extra time and expecting your shipment should be enough in many cases.
- Collaborate with a 3PL – Working with a professional third-party logistics provider (3PL) can be very beneficial. 3PLs can support you in many ways, including their fleet of trucks, their experience, and their digital technology, which you will also have access to.
LTL freight services have become increasingly important in today’s economy. Shipping quickly is imperative for online companies competing with other online retailers as well as brick-and-mortar stores. This also means that their products must be inventoried and housed in distribution centers and warehouses close to their customers at all times, but also that they can be delivered at a moment’s notice.
Understanding the scope of less than truckload shipping can be complicated as it is a vast and diverse industry. Hopefully, this blog gave you the confidence and information needed to get started, but as you ship more, it is essential to become educated about LTL as well.
If you need help or want to be more cost-efficient with your shipments, RedBird Logistics offers a range of logistic services – from simple LTL to multi-package solutions. You can rest assured that they will ensure your logistics processes are running smoothly and as efficiently as possible.