2 June 2018
Thanks to the rise of online super companies such as Amazon and eBay, customers are growing more and more accustomed to shopping online, clicking and having their purchases delivered immediately. As time has passed and consumers have become more and more accustomed to this type of instant gratification, online shopping, a radical transformation is occurring in what consumer expectations are of businesses in this contemporary world. The motto for today’s modern shopper might as well be, “I want this, and I want it right now.”
Because of this, in the ever-growing world of e-commerce, the success of many small to middle-sized businesses is heavily dependent upon their shipping and the choices they make revolving around the transportation of their goods. The vast majority of smaller to medium-sized e-companies utilize LTL, (less-than truckload shipping) for the transport of their goods, but many do not fully understand who to go to about LTL shipping in the most cost-effective manner. Below we will break down LTL freight shipping, the costs associated, and give tips on how to save on shipping via LTL.
You might be wondering what specifically LTL shipping refers to; technically, it references any shipment that does not fill a regular 48 – 53 ft trailer. While many larger companies generally ship via TL (truckload), most smaller companies do not ship in such large bulk. Because of this, FTL is not a cost-effective means of transport, since you are required to rent out the entire space, whereas with LTL you must only pay for the area of the truck that your cargo fills. So, if you only have enough goods to fill up a tenth of a truck, you pay for a tenth of the space, and then other companies rent out the other space for their goods. LTL shipments are generally less than 4,000 pounds and generally fill up less than seven pallet spots.
LTL is beneficial for companies that do not ship in large bulk amounts, that ship to multiple locations and desire a more economical and flexible way of shipping. While it is technically slower and less safe than a full truckload shipment, since you share space with other cargo and have to stop for delivery at several places, most companies chose this as the ideal method for their shipping. Further, many shipping companies offer pick-up and delivery support, along with all the tools and experience that come with years of loading and unloading goods.
LTL shipping rates
Before you begin learning how to save on shipping costs via LTL shipping, you must first know how you are charged for that service. Currently, there are a variety of factors that LTL shipping rates are based upon, the most common being:
- Absolute Minimum Charge (AMC): Without a doubt, the absolute minimum charge is the aspect of LTL carrier shipping rates that has been increasing at the fastest rate over the past few years. This is the monetary point in the sand which carriers will not charge below. Many carriers instituted these because less heavy cargo costs them more to carry than more bulky cargo, so the AMC balances out these types of shipments.
- Accessorials: Accessorial duties are imposed for additional services provided by the carrier that move beyond what is typically expected from a business to business pick-up and delivery. The most common type of accessorial charge would be a fuel surcharge, which is often factored into every shipment. Additional accessorial fees may include residential pickup or delivery, lift gate service, and limited access locations such as schools, storage units, jails, prisons, churches or governmental buildings.
- Base rates: Each and every LTL carrier fixes their own base rate, which is usually quoted per 100 lbs. Calculations made by shipping companies are often based on freight classification, with rates being modified if the company needs supplementary volume. Also, the gross cost of lanes sometimes increases when they have an equilibrium between their freight and trucks.
- Distance: As you might imagine, the further the distance required for travel, the more the shipment will cost per hundred pounds of cargo. The vast majority of LTL shippers stick to explicit geographic routes or regions, so it is wise to consider which zip codes an LTL carrier services. If your desired destination is outside of their service area, the LTL company may interline your goods, whereby they transfer the shipment to a different LTL carrier who does service that area for final delivery. If you are outside of the service area, this will likely cost more.
- Freight classification: However obscure an object you desire to ship, there is a freight classification for that thing. These classes are published via NMFC (national motor freight classification). According to NMFC, there are 18 classes that range from 50-500. There are a variety of different factors that determine a freight’s classification including handling, storability, density, liability, fragility, value, and liability. A lower-class rating refers to freight that is easy to handle and store and impervious to most damage; lower class freight, therefore, costs less. On the other hand, high class denotes cargo that is either, more expansive, dense of fragile. As you might imagine, this type of higher classification cargo runs at a higher rate.
- Weight: With freight, rates are structured inversely to weight. Therefore, the heavier a shipment, the less it costs per hundred pounds.
Ways to save on LTL shipments
Now that we have gone over the basics of LTL shipping and LTL shipping rates, we will discuss ways to save money on your future freights.
- Analyze your LTL costs – Just as in every aspect of your business, costs incurred by the business must be studied in order to find ways to save money and see how efficiently the company is running. By discovering inefficiencies and denoting all actions, you may measure the efficacy and progress of the changes being implemented. If you do not already, consider using a transportation management system in order to better analyze freight costs. Such systems provide you with instant status notifications, customized performance reports and a variety of other factors that detail transportation spending.
- Avoid Accessorials – While some accessorial charges are simply unavoidable, such as remote access locations or lift gate service, many accessorial charges can be skirted. Set a standard shipping procedure and research your carrier so you can avoid fees that may seem minor, but really stack up over time.
- Be wary of freight calculators – While LTL shipping calculators online may give you a vague idea or ballpark figure of what your freight will cost, as mentioned above, shipping quotes are multivariable and simply listing weight and destination do not give you a realistic number; it may cost more or less, but you should be sure it is within your budget.
- Consolidate shipments: If you have a variety of LTL shipments all heading to the same terminal over a period of time, combining those shipments into one shipment may be a great way to reduce cost. If shipments are not time sensitive, try to ship more product, just less often. While many retailers prefer smaller shipments, when possible, encourage them to receive large orders. It is significantly cheaper to ship nine pallets once a week than three pallets three times a week.
- Find consolidation programs – Freight consolidation takes place when several neighboring companies combine their LTL shipments that are intended to the same grocery chain, store or mass retailer. The carriers save money by having to take fewer trips or loads, and you save money by negotiating a better rate. If you are looking for ideal shipping partners, consider your local Chamber of Commerce or various other business organizations in your area.
- Know when you are shipping – When possible avoid heightened costs that arise during holiday or peak shopping times. On top of rates increasing, so too do delivery times since many of the drivers and carriers may take a holiday or vacation time off, meaning fewer drivers available. Plan ahead and ship early or after major holidays if your goods that require transport are not time sensitive.
- Minimize required pallet spaces – Do not haphazardly stack or palletize your goods. Optimize its potential volume by stacking effectively and not wasting space. Consult your carrier about ways to save space or stack your cargo more efficiently.
- Package Properly – If you do a poor job packing or palletizing your goods, you run the risk of damage or incurring fees. When packing remember, denser is better, do not over pack pallets beyond their required measurements, shrink wrap your cargo when possible, and utilize decking equipment via the carrier.
- Pay attention to the Bill of Lading – Do not move your goods or do anything until your Bill of Lading is drawn up. Upon completion, be sure to inspect it carefully. An imperfect or erroneous document could lead to unexpected fees, lost shipments, or incorrect delivery locations. Dot your I’s and cross your T’s, cover your bases, so you don’t have to pay more.
If you are looking to use LTL shipping, be sure to do your due diligence and research ways to optimize your shipping. If you are not shipping in full truck loads, LTL done right can be an e-commerce companies lifeblood. So, remember what rates are based off: AMC’s, accessorials, based rates, distance, freight classification and weight.
Develop relationships with businesses over time and look for ways that you could become more cost-efficient. Consider your regular shipping lanes and the goods you are shipping to see if there are cost saving avenues to pursue. Follow these simple steps, avoid cutting corners, and you will find dozens of opportunities to save money with all aspects of your LTL shipping.