When looking for ways to optimize transportation cost, Less Than Truckload (LTL) shipping is one of the first options to come to mind. By paying only for the space you use instead of the entire truck, you can significantly reduce your expenditure. However, several challenges complicate the seemingly simple practice. Let’s take a look at some of them and the ways in which you could offset those challenges.
Damages In Transit
Goods transported via LTL shipments are handled several times during the transit. The number of times the shipment would be transferred from one truck to another would depend upon the destination, the distance, the configuration of the goods in each truck, and the delivery deadlines among others. In other words, there’s no telling exactly how many times your shipment will change hands. Moreover, the probability of your shipment getting damaged is directly proportional to the number of times it is moved. The only way in which you can offset the chances of damages is simple in concept – invest in quality packaging.
Absence of Guaranteed Delivery
With LTL shipments, you can’t be sure of your goods being delivered within standard transit times. If your trucker does offer guaranteed delivery, it comes at extra cost. While there isn’t a short and simple solution to get around this challenge, you can ensure ‘near-guarantee’ by developing relationships with your carriers and partners. That way, you will be aware of they are facing any challenges, and will be able to reach out to alternative carriers in good time. Your carriers will collaborate with you to solve your problem. Another option is to opt for a third party logistics provider that would take complete ownership of this issue, leaving you free to focus on your core job.
Rising Cost (Even in LTL!)
Lower cost as compared to FTL shipping is one of the most attractive features of LTL shipping. However, even LTL rates are rising due to capacity crunch and a healthy economy. As per the 19th Annual State of Logistics Report produced by AT Kearney, “less-than-truckload pricing rose 6.6%, while full truckload rates were up 6.4%.” Further, an article by Jeff Berman in Supply Chain 24X7 describes Stifel analyst Dave Ross previewing second quarter earnings. “Ross noted that weight per shipment was up throughout the LTL sector for the sixth straight quarter, which, in turn, led to the highest average shipment size going back to 2014,” the article states. Ross further observed that, “on a year-to-date basis, LTL revenues are up 10% or more for LTL carriers through either volume or yield gains, coupled with pricing up in the 4%-to-7% range.”
So if you are working in a tight budget, don’t depend on LTL shipping rates to remain steady. Instead, use these best practices to make the most of what’s on offer:
- Consolidate orders going to the same general location: When multiple orders are headed to the same area, combine them as a single shipment.
- Plan your shipments well in advance: The more time you give to shippers, the more cost advantage you will receive. This will also help with times when there is a capacity crunch. In the holiday season, for instance, when the demand for freight shoots up.
- Understand dimensional weight pricing: Carriers do not profit if they charge shippers only by weight, and are hence adopting dimensional weight pricing, which considers both – space and weight – of the package to arrive at the final cost. As a shipper, you must aim to increase package density to profit from this system.
- Avoid billing errors: Watch out for small mistakes in billing often add up to eat up shippers’ profit margins.
- Watch how your freight is classified: What you pay a carrier also depends upon the classification of your goods based upon weight, dimensions, density, ease of handling, value, and liability of damage, theft etc. Defined by the National Motor Freight Traffic Association (NMFTA), the 18 classes range from 50 to 500, 50 being lowest priced and 500 the highest. So check if your freight has been classified accurately.
Last Mile Connectivity
If you are shipping to areas not regularly served by your carriers, you may be charged extra for the trouble. Tackle this challenge by reaching out to freight forwarders. In all likelihood, you will find several independent trucking companies frequenting the area in question, with room to spare on their trucks. The setup is a win-win with carriers passing on the benefits to their customers, while you are assured of standard cost. We’ve also discussed in a previous blog about addressing the challenges of last mile delivery.