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YOUR COMPLETE GUIDE TO LESS THAN TRUCKLOAD SHIPPING

A Pub l i ca t i on o f LTX | Fo r more i n fo rmat ion v i s i t www. l t x so lu t i ons . com

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What is LTL Shipping 1

Advantages of LTL 3

How Much Does LTL Cost 4

LTL Classifications 6

How to Reduce LTL Cost 8

TABLE OF CONTENTS

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If you’re reading this eBook you are already probably aware, but the acronym “LTL” stands for less than truckload.

Less than truckload shipping is a mode of

transportation where the shipper may not need a

full 53-foot trailer (typical 18-wheeler truck) to ship

their product. LTL shipments usually range from one

hundred to ten thousand pounds, and/or 1-10 pallets.

LTL carriers use a “hub and spoke” network of terminals

and asset equipment to consolidate freight that is

traveling in similar directions, also known as lanes.

Less Than Truckload vs. Full Truckload

If that explanation of LTL still seems a little confusing

to you, it can be better understood when compared to

the more commonly used mode of transportation, full

truckload (FTL).

FTL shipping is fairly simple.

This is when a truck moves

a full trailer load of a single

shipper’s product from the

origin to the destination,

directly from point A to point

B. This is unlike LTL which

moves from the origin through

multiple terminal points before

arriving at its final destination. This method allows for

the consolidation of multiple customer’s freight from

multiple locations to ship together.

For example, Company ABC manufactures widgets, and

they need to send one pallet of widgets weighing 2,000

pounds from Peachtree City, GA to Fresno, CA. Due to

this being a small shipment, FTL would not be a logical

method and the manufacturer would opt to use LTL

instead.

What is LTL Shipping

LTL carriers use a “hub and spoke”

network of terminals and asset equipment

to consolidate freight that is

traveling in similar directions, also known as lanes.

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In the map above you can see how the carrier would

pick up the pallet of widgets at the customer’s origin

transferring it to the LTL origin terminal. The origin

terminal then breaks down the trailer of freight, and

reloads it onto a trailer traveling to the origin hub in

Atlanta, GA. The pallet is then cross-docked (loaded

directly from trailer to trailer) onto a line-haul trailer

traveling to Jackson, MI. From Jackson, the pallet moves

again to a bulk break facility in Memphis, TN and then

to a relay facility in Oklahoma City, OK. From the relay

facility, it travels to Rialto, CA then to the destination

terminal in Fresno. Once the widgets have arrived in

Fresno, they can be loaded out for travel to their final

destination.

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Now that we know exactly what LTL and FTL shipping are, lets discuss the advantages of using LTL rather than the typical go to method, FTL.

Cost

The number one advantage of using LTL is that your

shipment can be transported for a fraction of the cost

of hiring an entire truck. Also, pricing agreements can

be negotiated on an annual basis to offer accurate

forecasting based on shipping trends.

Flexibility

LTL provides some of the greatest flexibility in shipping

if you have shipments being sent to multiple locations

throughout a specific region, or the country. For

example, in most cases we can schedule and complete

pick-ups within a two-hour time frame. This is a benefit

of “just-in-time” manufacturers who do not have their

own warehouse space for finished products. LTX works

directly with a manufacturer currently that has 60,000+

square feet dedicated to making their product. They

use less than 2% of that space for staging and shipping.

Without the flexibility of LTL, this manufacturer would

require additional warehouse space.

Transit Times

This can be looked at as both an advantage and

disadvantage. While LTL does take longer to transport

than FTL, you can still transport cross-country loads

within a week. Nationally-based LTL carriers have the

ability to cover the majority of the United States in three

transit days or less.

Technology

LTL technology improves work-flow efficiency through:

streamlined pick-up requests, automated tracking

updates, document retrieval, and batch freight invoicing.

Advantages of LTL

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How Much Does LTL Cost

As we mentioned, one of the biggest advantages to LTL shipping is that it is cost effective. But, LTL freight rates can be very confusing. Unlike a full truckload whose rates are usually based on a per-mile rate or per-hundred weight plus a fuel charge, there are many factors that influence the cost of an LTL shipment.

Base Rates and Discounts

The first step in negotiating your LTL rates is to bid out

to carriers to find out their base rates and discounts.

While a large discount may be the first thing that

catches your eye, remember to look at the final price

when couples with the base rate. While a carrier may

offer you a lower discount rate, if their base rate is

significantly less, this could end up being a better price.

These base rates are usually determined by a particular

tariff. A tariff is a rate matrix that establishes the base

rates of individual shipments that take into account

all the factors that make up LTL pricing: origin zip,

destination zip, class and weight. Most carriers have

their own tariffs, which can make it extremely difficult to

compare apples to apples. The best scenario is to have

all carriers bid off the same tariff. An established third-

party logistics (3PL) company can help you with this.

A 3PL can also help negotiate higher discounts. In fact,

a well-established 3PL or large shipper can save an

extra 19-25% off already heavily discounted freight

rates if they are routinely making shipments to multiple

locations.

Classification

Every piece of freight has a classification, which is a

driving force behind its unique freight rate. Freight

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classes are designed to help form common standard

freight pricing for shipments, which is useful when using

multiple carriers, warehouses, and brokers. Freight

classes are defined by the National Motor Freight Traffic

Association (NMFTA).

There are 18 freight classes, ranging from 50 to 500.

The density of your freight is a major factor when

determining your classification. The high density your

product is, the lower the classification (typically 50-85),

and the more fragile/less dense the product, the higher

the classification (usually 125-500).

Distance

Similar to classification, distance is directly correlated

to price. The longer the haul, the higher the price per

hundred pounds. The fewer the miles between origin

and destination, the lower the cost.

Of course, it can’t be just that simple though. You also

must note the territory an LTL carrier covers with

direct points, meaning that the carrier has assets that

can cover the entire length of the haul from origin to

destination. If your shipment goes outside of these

direct points, the carrier will then hand off the freight

to another LTL carrier who can continue moving

the shipment to its final destination, also known as

interlining. Interlining typically results in a higher cost

than a shipment that only involves direct points due to

lower discounts and higher minimum charges.

Minimum Charges

Minimum charges are the ‘floor level’ prices that a

carrier establishes as the absolute lowest charge for a

shipment. These are used in order to off-set the costs

associated with transporting shipments that do not

produce the same revenue as heavier shipments.

For instance, if your minimum charge is set at $75 and

you have a shipment that does not meet the carrier’s

criteria to receive a discounted rate, then you will be

charged $75 for that shipment.

Accessorial Charges

Accessorial charges are additional services that the

carrier might provide outside of the standard shipping

and receiving procedures. While the other items we

have addressed help to make up the total base rate,

accessorial fees can add up, so they are important to

keep in mind.

The most common accessorial charges are residential

service, lift gate service, inside delivery, and limited

access. These charges can often times be negotiated to

a flat rate or even waived altogether.

Fuel Surcharge

A fuel surcharge is included for every LTL shipment.

This is an agreed upon percentage of the base cost of

a shipment determined by the weekly national average

of diesel fuel. You should clearly understand your fuel

surcharge table to ensure that as fuel rises or falls, you

are not paying more than you should for any shipment.

A well-established 3PL or large shipper can save an extra 19-25% off already heavily discounted freight rates if they are routinely making shipments to multiple locations.

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Less Than Truckload Freight Classification

Freight classes are designed to help form common standard freight pricing for shipments, which is useful when using multiple carriers, warehouses, and brokers. Freight classes are defined by the National Motor Freight Traffic Association (NMFTA), and made available through the National Motor Freight Classification.

Each type of product is assigned a classification through

the NMFTA for LTL shipping. Commodities are grouped

into one of 18 classes ranging from 50 – 500, 50 being

the lowest price and 500 being the most expensive. The

classification of a product directly affects the price that

product will cost to ship.

Freight Class Factors

To determine your freight classification, you must first

know certain information about your freight. Freight

class is based on the following criteria:

• Weight

• Length and Height

• Density

• Ease of handling

• Value

• Liability of theft, damage, break-ability and spoilage

Stow-ability and Handling

Stow-ability is defining the difficulty it takes to load,

unload and carry your freight. Somethings that will

influence a freights stow-ability are:

• Hazardous materials (cannot be shipped with non-hazardous materials)

• Excessive weight or length

• Protrusions

• Inability to stack pallets

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Weight, Dimensions, and Density

Freight density is the space an item occupies in relation

to its weight. This is determined by dividing the weight

of the item in pounds by the volume in cubic feet. You

find the total cubic feet by taking height x width x depth

and driving that number by 1,728 (the number of cubic

inches in a cubic foot).

For example, your 40” by 48” pallet has a height of 48”

and a weighs 425lbs. (40 x 48 x 48)/ 1,728 gives you

a volume of 53.33 cubic ft. You would then take your

weight of 425/53.33 to give you a density of 7.97.

Liability

Liability is the possibility that freight will be stolen

or damaged, as well as the possibility of it damaging

adjacent freight.

Perishable cargo and cargo prone to spontaneous

combustion are always classified based on liability and

assigned a value per pound.

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How to Reduce LTL Freight Cost

Now that you are educated on what goes into an LTL freight rate, you may realize that it can be a bit complex. The good thing about this is that there are numerous places where cost saving negotiations can take place.

Packaging for Price

Most major carriers are transitioning to dimensional

weight pricing systems. This is because carriers that are

charging shippers based purely on the weight of their

product are losing space and money.

For example, if a customer purchases a pair of socks,

and the warehouse packages them in a considerably

larger box than needed, then this is wasting precious

space on a carrier’s truck. Space that could be used for

additional products.

When using the dimensional weight pricing method, it

identifies space as opposed to weight, and packaging

like the example can cause the shipper to be penalized

for not packing efficiently. Essentially, shippers want to

increase pack density. This will decrease shipping costs,

and reduce potential damage.

Freight Audit and Pay

One out of every four freight bills contains an error

that could affect your company’s bottom-line. Manual

auditing and payment is time-consuming and often

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requires additional administrative staff time. For

companies who lack these resources, they can save

time and money by outsourcing Freight Audit and Pay

through a Third Party Logistics (3PL) company.

A freight audit is a business process where the

company’s freight bills are examined, adjusted and

verified for accuracy. As a shipper, you will see an

immediate return on investment. Auditing has an

average recovery on errors of 6-8%. If you’re sending

100 shipments a week, and 8 of those are performing

cash deficit errors, an audit could drastically change

your bottom-line.

In addition to the error correction savings, freight

auditing can also help your bottom-line by cutting labor

costs. It has been noted that the average cost of labor

to verify, process and pay an internal freight invoice is

$11, but outsourcing this activity is only approximately 5

to 10% of that internal cost.

Use a TMS

Another way to save on your LTL shipping is

by implementing freight technology, such as a

transportation management software (TMS). When you

implement a TMS you can:

• Eliminate manual processes

• Reduce cost by better route planning and load optimization

• Have multiple carriers to choose from at your fingertips

• Cash flow improvement through proper freight accounting

• Ability to analyze data and shipment activity

• Improved accountability with visibility into the supply chain

• Decreased time in training new hires

A TMS is designed to assist in decreasing the resources

you need and the time in which you spend trying to

arrange and finalize an LTL shipment.

Partner with a Third Party Logistics Company

A reputable and

experienced third party

logistics company will save

you on both hard and soft

costs.

A 3PL brings with it an

existing network of valuable

carrier relationships, which

can save you an extra 10%-

25% off already discounted

freight costs. In addition to

outright freight costs, a 3PL

will bring many additional freight management solutions

such as:

• A tried and true TMS software

• Freight data analytics and reporting

• Freight accounting

Furthermore, they will always save you in reduced

labor cost and man hours. These savings typically come

from the 3PL’s customer service team and technology

capabilities.

The 3PL’s customer service team becomes a

direct extension of your team. They take over the

responsibilities of claims management, track and trace,

expediting, data procurement, reporting, invoicing, and

auditing. Most importantly, outsourcing these tasks

to a 3PL allows you to reallocate your resources and

concentrate on what your company is best at: providing

services and generating products.

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less than truckload shipping check out our blog at

www.ltxsolutions.com/resources/blog/

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