If your business ships product, you need to become familiar with your shipping options, both to save your company money and to optimize your delivery. While it seems simple enough at face value, it might come as a bit of a surprise to learn that there are many options for getting your product from point A to point B in a timely fashion, even if you’re just focusing on ground shipping.
In this post, we will go over one of those ground shipping options — LTL shipping, including in what situations it might be a good option for your business, and then discuss the different carriers and the potential advantages of choosing an LTL carrier over a TL carrier.
Confused yet? Don’t worry — we’ll explain everything! First, let’s help you get a better grasp on what exactly LTL shipping means.
What is LTL shipping?
When your company ships product, it is sent to its destination either by air, rail, water, truck, or sometimes a combination therein. Here in the United States, shipping via ground generally is a lower-cost option, and offers great flexibility. It is also generally faster and than using a train because your shipment will not depend upon the railroad schedule.
When it comes to shipping product via truck, most freight carriers in the U.S. will offer two options: TL, or truckload service, and LTL, which stands for less-than truckload shipments. As their names would suggest, a TL carrier takes a full container of product from one company, while LTL involves moving goods from different businesses on one truck. Sharing the truck load offers companies a cheaper option for shipping vs. using a TL carrier.
That’s because when you use LTL shipping, you will only pay for the portion of the truck that you need for your product. This makes LTL shipping a great option especially for small businesses, because often, the amount of product you need to ship won’t require an entire 48- or 53-foot trailer. Typical LTL shipments generally range from 100-5,000 pounds, but can go as high as 20,000 lbs in some cases. while a TL shipment usually means there are ten or more pallets of product that need to be shipped. Since your product only takes up a portion of the truck, other businesses will use the remaining space to ship their product that needs to get to the same area.
LTL shipping is a more cost-effective option and some freight companies like Flock Freight use a hubless model so that your shipment never sees the inside of a warehouse or is unloaded from the truck until it reaches its final destination.
While this covers things at a base level for LTL shipping, carriers can actually specialize in several different services within the LTL method. This can include lift gates, transit, residential pickups and deliveries, guaranteed services, freeze protection, and even bottom line costs.
How does LTL shipping work?
You might wonder how multiple companies can get their product onto the same truck, so here’s a quick breakdown. A traditional LTL carrier will have a certain number of trucks that collect shipments from customers in their local area every day. They will then bring the shipments to a terminal where the trucks are unloaded.
The carrier will weigh and rate each company’s shipment and process the bills. The product is then loaded onto an outbound truck that contains shipments from other companies that are going to the same area. The truck then delivers the shipment to the appropriate regional terminal where the product is unloaded again, then placed onto local delivery vehicles.
This process is known as a hub and spoke model of shipping, in which local terminals are the spokes and the larger central terminal or distribution center is the hub. The freight is gathered at the spoke terminals and moved to the hub terminal, where it is sorted, consolidated and delivered. With the traditional hub and spoke model, each shipment is handled multiple times from pick up to final delivery and most LTL carriers will provide updates on your shipment progress.
The Flock Freight shipping model
Flock Freight does things differently with shared truckload. Instead of using the traditional hub and spoke model of shipping, Flock Freight uses a hubless shipping service where the shipments are not unloaded from the trucks until they reach their destination. This not only increases efficiency, but decreases the chance of damage or loss of goods. Flock Freight’s shared truckload service, FlockDirect, pools multiple shipments onto one load which provides TL services at an LTL price.
What determines LTL shipping rates?
The main factors that will determine the cost of LTL shipping are distance, weight, the classification of the freight, and pick up and destination zip codes (known in the industry as the “lane”), and anything additional that is required.
The carrier will conduct a freight analysis to determine the class of your shipment. The freight class calculation will factor in weight, dimensions, and carrier liability.
Another factor we’ve yet to mention that comes along with ground shipping are fuel surcharges. This refers to the costs that are associated with the fuel required to complete the shipment. This charge will be added on top of the overall costs. The further the distance for the shipment, the higher the fuel costs will be.
The cost of fuel for your LTL shipment will be shared with the other businesses that are also utilizing your LTL truck, which can add to your savings.
If the item or items require special handling or delivery/pickup, this will also come at an additional cost. For instance, residential pickups and/or deliveries are often additional expenses, as is the handling of oversized items or hazardous materials.
When Did LTL Carriers Emerge?
LTL carriers emerged from the deregulation of the trucking industry. The Motor Carrier Act of 1935, created under the guidance of the Interstate Commerce Commission (ICC), required new truckers to acquire a “certificate of public convenience and necessity.”
This act limited the number of hours truckers could drive and monitored a company’s range. Carriers also had to file tariffs with the ICC 30 days before they could become effective. These tariffs could then be viewed by the public, and were subject to a challenge by another carrier.
Congress allowed carriers to fix their prices in 1948, effectively ceasing competition in the industry, as the ICC denied applications from new carriers for the next 30 years. This started to change in the early 1970s, as a number of acts were implemented to reduce price fixing and collective vendor pricing. The Motor Carrier Act was the final portion of this deregulation.
This resulted in intense price competition and lower profit margins, as thousands of new non-union, low-cost carriers entered the market. This forever changed the trucking industry, doubling the amount of carriers, while slashing the amount of workers in the union.
Today, although LTL shipping gains popularity, it remains just a tiny piece of the overall shipping freight in the country. UPS and FedEx entered the LTL carrier market back in the 1990s, but were the last major additions to the sector, as current regulations make it difficult for others to join. A shortage in drivers also making an impact on the potential for growth within the LTL freight sector.
What is an LTL carrier?
As you might have guessed, an LTL carrier is a trucking company that moves products from multiple customers on the same truck.
LTL carriers typically utilize several different vehicles to complete the entire process, mainly using 53-foot trailers for local pick-ups and deliveries, as well as hauling two tandem pup trailers for hauling freight on the interstate. Some trailers may even be temperature controlled.
What are the advantages of LTL shipping?
The main advantage of using an LTL carrier is the potential for significant savings. Using an LTL carrier can often come at a fraction of the price of a full truckload. The main competition for LTL carriers is parcel carriers, who typically will not take shipments over 70 to 100 pounds.
The savings alone can be enough for many businesses, but there are also some accessory services that LTL carriers provide that TL does not.
These may include residential, or “non-commercial” delivery, inside delivery, notification prior to delivery, liftgate service, freeze protection, and more. These additional services often come at a flat, predetermined rate prior to delivery, or as a weight-based surcharge. These extra touches give LTL carriers an added element of customer service that may be appreciated by some businesses with special needs.
LTL carriers also generally provide shippers with real-time information on the progress of their delivery, which can give some real peace of mind. This will include a bill of lading number, PRO number, PO number, or shipment reference number which you can use to track your shipment.
Companies with lighter loads that won’t fill up the entire truck should look into an LTL carrier for a viable, cost-saving option.