If you own such a company that has regular shipping requirements, then you likely know all too well how shipping can have a positive impact on your organization’s proficiency and cut significant costs from your bottom line. One of the most stressful decisions you may have to make is how to handle your company’s shipping. Likely you have felt or currently feel overwhelmed by making such a decision since there are a variety of carrier options, ways to ship, and a whole list of industry jargon that you have to know to understand shipping guidelines.
You would be excused for wishing to focus on running your business and just picking the shipping first option available. Unfortunately, that would not be a beneficial decision for the long-term health of your company. These days, in an e-commerce world driven by companies such as Amazon, shipping is now one of the most critical decisions an organization can make since their business’ life or death depends entirely on the efficiency and reliability of the carriers they employ.
By carefully deciding how you will ship and who you will ship with, you can set your company up for a mutually beneficial, long-term relationship. But, if you make a rash or uninformed decision, you could open up a whole new can of worms. Specifically, choosing between less than truckload (LTL) shipping and full truckload (TL) shipping methods is difficult.
There are a variety of factors you must weigh such as freight class, freight density, freight dimensions fragility, etc. To combat a hastily formed conclusion, we will discuss in depth the disparities between full truckload shipping and less-than truckload shipping with a focus on the difference in rates. Depending on your specific freight necessities, one option is likely a better decision than the other.
Understanding TL and LTL Shipping
In the case of TL, you contract out the entirety of the truck’s cargo hold for your goods, and whether those goods take up the sum whole of the space is entirely up to you. If you have more than ten shrink-wrapped pallets of 5,000 pounds worth of products needing to be shipped, then you likely need to use TL. That said, even if your goods do not fill up the truck completely, TL may be ideal for your company if:
- Your customers prefer to have all of their assets isolated in one truck – Less likely to be damaged by unloading and reloading on multiple trucks.
- You are in a time crunch – TL can be a faster method than LTL since goods are only heading to a single destination. You do not need to make multiple stops or multiple deliveries unless you choose to do so.
On the other hand, less than truckload shipping allows multiple shippers to rent out space on the same truck. If you ship less than 5,000 pounds regularly, it is nearly always more cost efficient to use LTL rather than TL. If your goods only take up a fifth of the truck, there is no reason why you shouldn’t ship LTL.
LTL freight shipping is ideal for small businesses that do not ship in bulk. While they take marginally longer to reach their final destination as a result of frequent drop-offs at multiple locations, LTL shipping has played an essential role in the growth of many small e-commerce businesses.
LTL vs. TL
Although we briefly touched on the differences between the two, it is important we delve a little deeper so that you know what you are getting when you are given an LTL or TL rate.
Size of Shipment
Full Truckload: A full truckload shipment can max out at roughly 30 40” x 48” pallets. Density plays a significant factor in space that your cargo takes up, so shipment weights can range from as light as 5,000 pounds to as substantial as 50,000 pounds.
Less than Truckload: LTL shipments generally range from 100-5,000 pounds, but can go as high as 20,000 lbs in some cases. These goods represent anywhere from one to six pallets of space.
Full Truckload: When you rent out the full truckload, it is effectively your truck until your goods reach their intended destination. Since they are beholden to you, there are no additional stops, delays, transfers or the like. This means faster transit times and a happier consignee.
Less than Truckload: LTL ships multiple shipments, from a variety of customers, so your freight must share space. As a result, your goods have to make numerous delivery stops before they make it to their destination.
A reefer trailer refers to a refrigerated trailer, typically utilized to transport perishable goods that need to be at a specific temperature to survive, such as veggies, fruits, meat, fish, dairy goods, flowers, and other.
Full Truckload: Reefer trailers are readily available and held in stock. They come with a wide array of features with some being able to modulate temperature from 70’s to the 0’s. With a full truckload, the shipment is set to whatever temperature you want and is beholden to your schedule. While slightly more expensive due to the specialized nature of the holds and the temperature controls, fridge truckload shipments act in a very similar manner to regular shipments.
Less than Truckload: As you might imagine, refrigerated LTL shipments are harder to locate and lockdown. Since LTL shares space, you have to find trailers with goods that have to be regulated at the same temperature. As a result, many LTL reefer carriers have schedules that are determined by temperatures the holds run at and shipping lanes. This scarcity and the logistical issues can make it hard to locate LTL reefer carriers, especially on short notice.
LTL and TL Shipping Rates
The most significant difference between these two shipping options is pricing and the rates that are offered. A variety of elements are taken into account with freight shipping rates. Appraisal of each component can guide you to the best shipping service based on your particular needs.
Full Truckload: Truckload freight pricing relies entirely on the current market. The rates are not established prior, and generally, full truckload freight dealings take place over the phone or the web. These rates tend to fluctuate, either by the time of the year, month, week, day or hour.
Pricing factors include the weight of the shipment, shipping lanes, route, fuels costs, seasons, location, origin, destination, truck carrying capacity, and operation costs. Rates vary from carrier to carrier, more often than not. Since every carrier establishes its own rate, uniformity in class rates should not be expected, especially for places off popular lanes and routes. To reach these off-route places, differences between carriers can range as high as 50%, so comparing carriers before making a routing decision is vital to saving you money.
Less than Truckload: The NMFTA (National Motor Freight Traffic Association) created a set of classifications to be used by freight shippers to create a set of standards and prices for shipping LTL goods. Packages are put into different classes, and each of these classes has a different associated cost and tariff. Factors in LTL pricing include:
- Additional Service Fees: These fees are added for any extra services that a provider may have to provide in the hauling of your goods, but are not required to do. These refer to carriers that go above and beyond the call of duty of regular business pick-up and drop-offs. Examples of accessorials may be lift gate service, limited access locations, inside delivery, palletizing, shrink wrapping, fuel surcharges, and residential deliveries. If you negotiate with the shipping company before these happenings, you may have the ability to settle on a flat rate with the accessorial waived.
- Base Rates: While many carriers have similar rates, most have their own unique base rate calculated per 100 pounds in conjunction with the freight classification and any other factors.
- Distance: The farther the distance a package needs to travel, the pricier it will generally be. That said, there are shipping lanes and routes that are higher volume or traffic that might help you get a better deal. Certain shippers do not cover certain routes, which would require a goods transfer to a companion carrier that does service that area.
- Freight Class: The NMFC (national motor freight classification) determined that there are 18 cargo classes ranging from 50 to 500.
- Density – Barring no issues with stowing, handling, or liability, density plays the largest factor in determining class. Density is weight divided by volume and is represented as pounds per cubic feet. There is an inverse relationship between classification numbers and the density of an object, with least dense packages (less than a pound) being classed at 500. Generally, the higher the class, the more expensive/valuable the package.
- Handling – If an item has an odd shape, size, is fragile, extra heavy, or possibly hazardous, it may be given a unique classification to reflect the handling difficulties associated with the item or the extra tools or man power required to move it. So, the easier an object is to load and transport, the less expensive the shipping.
- Liability – The odds that damage will be done to or by the cargo. This accounts for perishability, value per pound, hazardousness, and chance of theft.
- Stowability – If there are loading restrictions due to length, weight, protrusions, or if the object does not stack or have load-bearing surfaces, then the class may change.
- Minimum Charge: Every LTL service establishes a minimum shipping rate which they will not charge below. This is often done to offset less heavy cargo and deliveries to less populated routes. While LTL shipment is not only subject to a standard minimum, at times there may be as many as three minimums imposed including the SSMC, shipment minimum charge, which applies when carriers pick up a lone shipment. In order to avoid such a charge, be sure to request at least two or more shipments for any pick-up.
- Weight: The heavier a commodity is, the less it costs per hundred pounds. Most LTL class rates have six weight break off points, in addition to the minimum charge per shipment. That tiered system might look like this:
- Minimum charge per shipment
- Less than 500 lbs.
- 500 lbs. but less than 1,000 lbs.
- 1,000 lbs. but less than 2,000 lbs.
- 2,000 lbs. but less than 5,000 lbs.
- 5,000 lbs. but less than 10,000 lbs.
- 10,000 lbs. but less than 20,000 lbs.
LTL and TL rates vary quite significantly, and the vast majority of shippers will not utilize both. Therefore, it is important to take stock of what you are shipping, how much of it you are shipping and how regularly. From there, consider the various costs and benefits associated with LTL and TL shipping and make a decision that works best for your business.