Your Guide to LTL Freight
The basics of what LTL freight is
Less than truckload (LTL) freight is usually classified as shipments that weigh between 150 and 20,000 lbs. or when freight won’t fill an entire trailer. Simplified, LTL is usually perfect if your shipment is too big for parcel, but would waste space taking up an entire truckload. With LTL you only pay for space in the truck your freight is taking up and this is why you often can save significantly on the cost of shipping your freight.
In the past, the majority of LTL freight was predominantly in the industrial and manufacturing industry, but recently other industries — especially eCommerce and retail — have realized the benefits of utilizing this mode.
“Retail has become a bigger percentage [of LTL shipping] in the last five years. A lot of retail was truckload freight. . . now it’s become LTL” said Satish Jindel, president of a transportation research firm. This is because shippers are realizing that LTL can be a cost-efficient and flexible option that can meet their needs.
The benefits of using LTL Freight
LTL has become a more attractive option recently in part because providers have made major technology improvements to become more efficient, safer, and better equipped to handle shipper’s and customer’s needs. A large number of LTL providers have become problem solvers and utilize technology that allows for more flexibility and efficiency when shippers work with them.
For shippers, choosing LTL can lead to significant financial savings, reduce your carbon footprint, and achieve faster door-to-door delivery. Another benefit of LTL is the multiple service and capability options LTL carriers include like expedited services, lift gates, inside pickup and delivery, hazmat, volume LTL, and consolidation.
An example of LTL carriers making changes to improve service include A. Duie Pyle. Randy Swart, chief operating officer at A. Duie Pyle explained their offerings to meet the demands for smaller shippers in a Inbound Logistics article: “We have added a substantial number of smaller trucks to our fleet with lift gates to handle the increase in smaller shipments to customers without docks and in more congested areas. As a regional carrier, our freight does not go through any breakbulk facilities; it goes directly from the pickup service center to the delivery center, which reduces time and handlings. It also allows us to select the proper vehicle for the shipment size and delivery area because of our service density in the region.”
Getting started shipping LTL
When it comes down to booking a shipment with a software service, like a TMS, you’ll have multiple rates to choose between. The two main variables to look at when comparing rates and carriers are time and money.
- Transit time. How fast will your shipment get there is usually a key part of picking a carrier. Regional and multi-regional carriers will often have much better transit times and prices for your regional shipments. National LTL carriers will have better rates for long-haul lanes. Understanding and having multiple carrier relationships with both regional and national carriers will give you options and the ability to easily compare geographical differences in cost and time.
- Pricing Factors. Of course, price is always a major factor when comparing and choosing a carrier. Many shippers don’t utilize LTL enough because pricing and contracts can involve a ton of nuances. But while LTL can seem more complex than other mode options, you can ensure you get better pricing by understanding these key factors:
- Base rates & percentage discounts: When establishing LTL carrier relationships, the carrier will provide you base rates and then discounts off of those rates. Each carrier’s base rates and discounts vary so you’ll ultimately want to compare what is your net price. For instance, Carrier A could give you a 70% discount but could be more expensive than Carrier B who gave you a 50% discount, because Carrier A’s base rates are more. By compare the net price, you’ll have a better picture of what you’ll actually be paying.
- Absolute Minimum Charges (AMC): The AMC is the minimum cost a carrier will charge and is often not met until the shipment exceeds a certain weight – usually 250 lbs. This plays a part of freight classifications which we will cover next. Overall remember AMC is why shipping LTL is usually for freight that weighs more than 250lbs.
- Freight class: There are 18 different freight classes ranging from 50 to 500. The 18 classes are based on the density, value, stowability, handling and liability of the product. The classes are determined by the National Motor Freight Classification (NMFC). As the class increases from 50 to 500, the cost per hundred weight also increases to accommodate the more challenging freight products. Class 50 is a low class and describes very dense freight (heavy and compact) that is difficult to damage and easy to handle. A pallet of bricks for example would be class 50. Lower classes have lower freight rates. Higher classes represent lighter and less dense freight that take up more space and is more likely to be damaged. Examples of class 500 would be ping-pong balls. Higher classes will have higher freight rates. Always avoid guessing your freight class. If you guess or estimate incorrectly the shipment will have a steep reclassification charge added when it’s reweighed by the carrier.
- FAK: FAK (Freight all Kinds) is a pricing mechanism that groups multiple classes of freight into a single class. Savvy shippers negotiate FAK provisions that allow shippers to ship their products that has multiple classes all under one freight classification. While FAK can be misidentified as just a means to cut costs, it is especially helpful for easier rating, and reduces re-classification and billing errors for companies that ship a wide range of products.
- Accessorials: One of the reasons many eCommerce shippers are turning to LTL are the additional services LTL carriers provide. These include indoor delivery, residential delivery, lift gates, and more. But, there can be a catch, and that’s accessorial fees for those services. Ensure your TMS allows you to select any and all accessorials your shipment needs and then compare your rates. If you don’t add accessorials to your BOL, you could select a carrier and then later be hit with costs you weren’t prepared for. By comparing carriers with accessorials selected you’ll be able to accurately compare rates and won’t be later charged more than you were expecting.
Have a mix of regional and national LTL carrier relationships
Another factor of pricing is the distance the shipment is traveling. Regional carriers offer very competitive rates with faster delivery times within their specialized lanes. And if you are consistently shipping volume in a specific lane you can probably negotiate even better rates.
By establishing and having multiple carrier relationships with both regional and national carriers will give you more options and the ability to compare.
For reference here are the 2018 Quest for Quality Winners Regional LTL Carriers by Logistics Management:
For national and multi-regional carriers the 2018 Quest for Quality Winners were:
These are just a few of the carriers you can work with to find the best rates and transit times.
Double-check your documentation
With your shipment it is really important to get your bill of lading (BOL) information completely accurate. A BOL is legally binding document and serves as a receipt and contract between the shipper and the carrier. Provide the BOL to the carrier and attach a second copy to the freight with these details correctly filled out:
- Full origin and destination addresses
- Name and contact information of both the shipper and recipient
- Product description of goods
- Total weight and dimensions of the shipment (when measuring round up to nearest inch)
- Total number of items
- Packaging type (pallets, crates, drums, and/or cartons)
- Freight class
- Any accessorials and services (this will prevent any surprise fees)
- Special handling instructions
- If applicable hazmat indicated (you can learn more about shipping hazmat with the transportation.gov guide)
With Propel’s software solution your BOL is automatically created when you set up your shipment. By creating and storing the BOL with the shipment details you can always access it again within our system at any time. This ensures you aren’t missing any required information and enhances your business efficiencies by keeping your documents online and always easy to find. No more need for filing cabinets!
Although LTL shipping is especially advantageous for small businesses looking for savings. Recent trends of Amazon and other big companies have shown that there is room for more companies to take advantage of LTL for eCommerce, retail, and home delivery shipments. When incorporated effectively into a shipping strategy, LTL can help you meet your customer’s expectations and achieve your business goals for shipping.