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Increased consumer demand for 2-day, next day or even same day delivery has given rise to an era of fast technological innovation in the logistics and transportation field.
As shippers evolve to keep up with heightened consumer expectations, the transportation and logistics industry has followed suit, developing technologies, techniques and strategies to get materials and products from point A to point B more efficiently.
Some of these strategies and techniques can be difficult to understand—but we’ve got you covered!
Full Truckload (FTL) and Less Than Truckload (LTL) are shipping methods that carriers use to provide a high level of customized service to shippers.
Today we’re going to explore FTL and LTL shipping, and the advantages and disadvantages of each method. We’ll move on to discuss how both strategies can be used together for to make carriers more efficient and save shippers time and money.
LTL shipping exists to drive up efficiency and cut transportation costs. Without it, most companies that ship products to consumers would have trouble remaining solvent.
If a mid-sized bicycle manufacturer with production in Chicago wants to ship its products throughout the United States, there’s a good chance LTL shipping is involved at some point in the process.
Why?
Well, let’s say that on a given day, 12 bike frames were purchased online by customers from Minneapolis, and 6 frames by customers from Milwaukee.
Would it make sense for the company to send a truck with 18 bike frames on a mostly empty tractor trailer for a 1,000+ mile round trip journey?
Of course not!
Factor in fuel costs, driver wages and a whole slew of other factors and you’ve got yourself a recipe for bankruptcy.
So how do smaller companies—or even larger ones who ship small quantities of products across the country—stay in business?
If you guessed “LTL shipping,” you’re right.
The hypothetical bike company we just picked on wants to make sure it’s providing the highest level of service to its customers while maximizing its profits.
It’s only natural that it would look into a carrier that offers LTL shipping.
Apart from keeping our favorite bicycle manufacturer in business, LTL shipping exists to iron out some of the inefficiencies and issues that face the ground freight industry.
By consolidating freight from multiple shippers, carriers can maximize their profits for a given load and decrease the average amount of unused space in its shipping containers. This strategy also benefits shippers, as carriers will often provide discounts to shippers who request a steady stream of LTL loads.
Let’s say our bike company gets an average of 60 orders from Minnesota and 40 from Wisconsin per week. Based on this steady stream of orders, it can partner with an LTL provider and save.
LTL shipping fits well into a recent global trend that sees an increasing amount of small manufacturers entering the scene. These small manufacturers wouldn’t be able to survive—or at least ship nationally—if it weren’t for the existence of LTL carriers.
LTL shipping also benefits carriers in that it lessens the strain that the driver shortage places on transportation companies. With LTL, carriers can spend less time recruiting and onboarding drivers if the size of each truckload is optimized.
Fewer, full trucks will always beat out more, partially empty trucks when it comes to cost savings and alleviating stress on HR departments to create a steady influx of new, available drivers.
Finally, LTL shipping reduces costs inherent in operating a greater number of commercial vehicles. Fewer trucks on the road can mean lower maintenance, and often, decreased regulatory costs.
By nature of the fact that LTL carriers are often transporting smaller shipments, they typically don’t require full-sized trailers—although they can technically operate trucks and trailers of any size, depending on their needs.
Most often, LTL carriers operate van trailers, while refrigerated LTL carriers will operate various temperature controlled trailers and vehicles, depending on the nature of the goods they are transporting.
Since private fleets usually only service the company that owns them, and dedicated fleets are reserved for the use of one company, LTL carriers are most often third party logistics companies (3PLs).
Multiple factors have a say in how LTL shipping prices are defined.
Carriers use pick up and destination zip codes to determine the distance freight must travel. Then they use the freight’s weight and class—based on NMFC codes—to determine the shipment cost.
Carriers will also typically offer a discounted rate to customers who choose to consolidate their freight with that of other shippers. These discounts are usually provided by means of the carrier lowering the freight class of the items being shipped, so as to lower the price.
The final factor in determining LTL shipping rates is the presence of accessorials.
Accessorials are additional services that shippers may need carriers to provide at the final destination in order to ensure that the product gets into the right hands shortly. Naturally, these accessorials take time and slow down the delivery of other shipments, so carriers need to adjust their pricing accordingly.
FTL rates are quite a bit simpler to price out, since an entire truck is being dedicated to one company’s shipment. Carriers price out FTL shipments on a cost per mile basis, or based on a single door to door rate. FTL shipments are also subject to fuel surcharges.
While it’s clear that LTL shipping opens many doors for small to mid-sized shippers to ship ground freight nationally, it’s important to understand some of the negative factors of LTL shipping.
LTL freight can take a lot longer to reach its destination, since it experiences multiple stops, as not all of the cargo shares the same destination. LTL freight also travels on a hub system, meaning that shipments can be transferred multiple times before arriving at their destination.
This creates a host of possible issues:
The first, and most obvious issue is that while the overall process as a whole tends to take longer than FTL shipping, LTL freight is also more susceptible to delays, as it relies on more moving pieces.
Furthermore, transferring and increased handling of freight increases the possibility of damage to shipments.
Last, frequent stops during the last mile—as opposed to one stop at a product’s final destination—increases shipping times and can increase fuel surcharges.
Shippers who promise fast delivery to their customers need to be aware of the limitations that LTL freight can pose of the efficiency of their shipping times. These shippers must be particularly organized in order to ensure that they are fulfilling their promises.
For this reason, it’s important for shippers to be in good hands—to work with carriers and 3PLs who are hands-on in understanding and planning how their LTL shipments will occur.
Carriers who effectively leverage transportation management technology to monitor all aspects of their LTL shipping process have a higher probability of getting products from point A to point B on time and undamaged.
The best LTL carriers will use transportation management techniques such as pooling, shipment aggregation and cross-docking to consolidate shipments and efficiently get them to their destination.
FTL shipping differs from LTL shipping in that it doesn’t combine freight from multiple shippers, and shipments don’t make stops on the way to their destination.
FTL shipments tend to be large—usually in excess of 10,000 lbs, and are palletized.
FTL shipping comes with many advantages, if shippers can afford it.
While FTL shipping can’t offer the discounted pricing inherent in LTL shipping, it’s a premium solution, and often caters most effectively to the needs of larger companies who need to ship large quantities of palletized freight.
FTL is the best way to transport large shipments. After all, if a company can fill up one truck with its own freight, why would it opt to pay for multiple vehicles that make several stops and use up valuable time and extra fuel to do so?
Let's say our mid-sized bike company from earlier goes through a period of massive growth and becomes a major manufacturer of bike frames, getting orders from Illinois, Wisconsin and Minnesota by the thousands.
It probably makes sense for the company to opt for full truckload shipping in order to streamline the shipping process.
Shippers can also avoid potential damage from handling and transferring goods by opting for FTL and avoiding all of the stops of an LTL hub system.
Many of the problems with FTL shipping are directly associated with the benefits of LTL.
The cost of FTL shipping is often prohibitive for shippers who have a need to move smaller quantities of freight, as it usually wouldn’t make sense to employ a half-empty truck when a shipment could be combined with many others.
FTL also provides drivers with more leverage to set prices, define their availability, and choose their preferred destination. Since there is a massive driver shortage, it can be difficult to find the right driver at the right time.
Ultimately, a company’s shipping strategy does not have to reside fully in one camp. It all comes down to effective freight allocation.
While for some smaller shippers it may make sense to rely fully on LTL shipping, larger companies may opt for a combination that best suits their business based on a variety of factors.
These larger shippers should work with a carrier or a 3PL that uses a Transportation Management System (TMS) to combine the best aspects of LTL and FTL freight scheduling by leveraging technology.
By constantly analyzing and tracking numerous variables, including factors as simple as origin, destination, driver availability, and the size and freight class of outgoing shipments, 3PLs can find the most efficient ways to consolidate freight.
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