What is LTL Freight Shipping?
What is LTL Freight Shipping?
One of the wonders of advancing technologies is the ability to purchase anything from anywhere and get it shipped right to your door without ever even leaving your home. The convenience factor has only gotten better as big box brands and stores offer faster shipping, so you can get exactly what you want with minimal wait times.
However, it’s not all science and digital technologies. Most goods still travel via freight. According to the U.S. Department of Transportation, the country’s freight system moves over 54 million tons of goods (averaging about $48 billion) every single day. That equals about 63 tons of freight for every person in the country per year. By 2040, the Department of Transportation estimates that freight tonnage will increase by about 45 percent, forcing the country’s system to haul another 9 billion tons of freight.
That expansive growth has required newer methods of hauling freight that improve efficiency (preventing clogged systems and long shipping times) without sacrificing overall safety or quality of service. In response, many carriers now provide LTL freight shipping. Let’s take a closer look at LTL freight shipping and its benefits to your business and the end user.
What is LTL Shipping & What Does LTL Stand For?
LTL stands for “less than truckload.” The general idea of less than truckload shipping is transporting goods that take up only some fraction of a trailer. Full truckload shipments are the more traditional form of transporting freight and involves taking up the complete weight and space limits of a trailer, from end to end, with all of your goods.
This often means waiting to completely fill up a truck from a single manufacturer before proceeding to the delivery destination, which equates to longer shipping times. LTL freight shipping involves sharing the space within a trailer, consolidating multiple shippers to make a full truckload. Each shipper pays for their portion of space and weight (dimensional weight).
Along with packing fewer goods into a trailer, LTL freight shipping operates through a hub and spoke model of pickups and deliveries. In this model, local terminals act as the spokes that connect to central distribution centers that act as the hubs. The local terminals gather goods and local freight from shippers. These goods are gathered into outbound trailers that are then transported to the distribution centers. From there, the goods are either sorted and delivered or separated and placed among other freight for continued transportation.
LTL carriers usually operate van trailers that are enclosed or covered. Many carriers also offer specialized trailers, including refrigerated trailers for temperature control. Most trailers feature roll up doors instead of swing doors. Although this allows for easier access to the inside of the trailer, roll up doors make the entrance to the back of the trailer much smaller. Many carriers will also use pup trailers, which allow them to haul two trailers in tandem. This helps to streamline the process as goods have already been sorted within each pup trailer. The driver simply needs to drop off the trailer at the designated terminals as they travel across the country.
The Fluctuating LTL Industry
Regulations for the trucking industry in the United States weren’t instated until 1935 under the watchful eye of the Interstate Commerce Commission and the Motor Carrier Act of 1935. This law required truckers to obtain a certificate of public convenience and necessity for the ICC and to file tariffs 30 days before they became effective. The tariffs could then be viewed by the ICC and any interested party and could be challenged by railroads or another carrier, resulting in suspensions until the ICC could complete a full investigation.
Congress allowed freight carriers to set fixed prices and excluded them from any antitrust legislation in 1948. Over the course of 30 years, the ICC denied any applications from new carriers, effectively eliminating any sort of competition. However, the trucking industry saw a shift in the early 1970s as the government began to sign various laws that reduced collective vendor pricing and price fixing. This culminated in the Motor Carrier Act of 1980, which allowed for greater price competition, lower cost margins, and a flood of new carriers.
This flood and the lack of regulations led to a dip in the average LTL rate by about 20 percent between 1977 and 1982. The amount of carriers doubled in the 1980s. Today, LTL comprises about $26.5 billion of the larger $700 billion transportation industry, and as important as LTL shipping is to modern supply chains, LTL carriers often meet significant barriers to entry with very few new carriers in the sector. This has led to a much more finite capacity in the LTL sector and only further regulations thanks to new laws, like the Map-21 freight broker bond requirements. Although LTL carriers took a hit during the recession, it has since picked back up and maintains steady growth.
Benefits of LTL Shipments:
- Lower Costs: The main benefit of LTL freight shipping to businesses is the decreased shipping cost. As trailers share their space among several shippers at once in LTL shipping, the method is much more cost effective for all parties involved. It’s particularly beneficial for smaller companies, making it much easier to control inventory and cost.
- Eco-friendly: LTL freight shipping is also eco-friendly, reducing your emissions and carbon footprint. The alternative is to ship goods in a trailer that’s not at capacity. Many larger brands operate this way as a means of cutting down shipping times, but this method also drastically reduces efficiency as it essentially forces shippers to use more trucks to ship freight. That means more trucks on the road, higher emissions, larger carbon footprint, and increased risk of damage and accidents. LTL forces multiple shippers to combine freight, making it easier to fill a whole trailer.
- Technology & Track-ability: Best of all, LTL freight shipping is usually supported by cutting-edge freight shipping technology that streamlines processes. From API to automated pick-up requests to tracking, LTL technologies improve efficiency and usability for all individuals involved, ultimately leading to greater satisfaction for the end user.
Calculating Rates for LTL Freight
There are a number of factors that determine LTL shipping rates, namely:
- Class: Higher class items are generally more expensive to ship.
- Weight & Dimensions: The weight and dimensions of any shipment determine the freight class, which impact the freight shipping rates.
- Zip Codes for Pickup & Destination Locations: Typically, the longer the distance between the pick-up and destination, the higher the shipping rate.
- Type of Freight: Fragile, perishable, hazardous, and other items that require special handling and care usually require higher costs.
- Additional Services Required by the Shipper or End User: Expedited shipments, tracking, and other additional LTL freight services can add to the total cost of shipping.
Fuel surcharges also comprise a large part of the costs to ship via LTL. Fuel surcharges refer to any costs associated with fuel for the lane of shipment and added to any line haul costs. Fuel costs are updated weekly based on the national average cost of diesel. Due to the fluctuating fuel costs that constantly seem to be growing, LTL freight shipping has become the more popular option as it allows carriers to only pay for their portion of a shipment instead of paying for the contents of a full truckload carrier.
Carriers also often provide discounts to shippers and brokers for goods they need to secure specifically for business. The carrier negotiates these discounts and may even offer FAK (freight of all kinds) rates to further bring down the total cost of the shipments. Freight of all kinds essentially changes the class of the freight. For example, microwaves are class 85. The carrier may consider moving the microwaves at the freight of all kinds rate with a lower class of 50, thus reducing the overall cost.
Shippers and carriers should work together to determine the best and fairest price for both parties. This often means analyzing freight shipping data and conducting a thorough analysis of the freight. This ultimately leads to better negotiations and allows the shipper to save on their shipping costs without sacrificing the quality and care offered by the carrier.
When to Choose LTL Freight Shipments
LTL is ideal for smaller businesses who have freight that cannot be shipped as a parcel and weighs less than 15,000 pounds. Less-than-truckload LTL is also better for those who want to maximize their savings without sacrificing good quality service.
AuptiX is dedicated to changing the LTL industry to better serve small- to medium-sized businesses. Unlike competitors, AuptiX provides the lowest shipping LTL freight rates regardless of the total volume. To learn more or to get the lowest freight quote on an LTL freight shipment, please contact us today.
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