April 5, 2019

Boosting Less than Truckload (LTL) Transport

Written by Garret Weigel | Supply Chain

The trucking industry was hot last year. While many shipments were made in bulk and filled an entire truck going from a single origin to a single destination, many were not filled to capacity. These shipments fit into another category: less than truckload, also referred to as “LTL.”

 

The trucking industry has enjoyed a very robust supply and demand equation where they are the supply, while consumers and buyers from industrial companies act as the demand. The world economy is enjoying a healthy e-commerce environment whereby consumers all over the world are shopping and purchasing globally. The demand has been much greater than the supply, which has lead to an increase in prices and caused trucking fleets to invest in more capital assets. While the trend has been widely reported, LTL shipping isn’t always an area of focus.

 

LTL shipping is the transportation of smaller shipments of freight that do not fill an even truckload. They’re a notch above parcel carriers and a notch below a full truckload carrier. Parcel carriers usually handle freight that has been broken down into small units of less than 150 pounds. A full truckload carrier has enough space to fill an entire container or semi-trailer. A semi-trailer may be somewhere between 26 and 53 feet long, and requires a substantial amount of freight to make that shipment economical.

 

Less Than a Full Truckload

When shipments don't qualify for a total trailer or when they're not parcel shipments, they fall in the LTL category. They may incorporate cargo of two to six different shippers. This category has blossomed over the past several years, along with the overall market for shipments by over-the-road trucks; e-commerce, along with a healthy economy, have buoyed demand for finished goods to be available close to the consumer.

 

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An issue that comes into play with LTL shipments is their size, which may present some challenges to carriers. Carriers are able to manage a specific shipment when they have a full truckload. With LTL, the cargo size, the size of the pallets, and their weight vary greatly. Consequently, carriers must accommodate variables such as the sizes and shapes of that cargo in order to combine with other cargo and create an economical full-load shipment.

 

LTL and Pilferage

Another issue facing LTL shipments is pilferage. Because thieves look at cargo theft strategically, they're more prone to steal only a couple pallets of cargo rather than an entire truck. Doing so is less likely to be noticed and is easier to accomplish. Therefore, LTL shipments are often the first target of pilferage. Last year, as truck transport was enjoying its upsurge, pilferage thefts increased by about 18%. In the past four years, pilferage has increased almost 200%, and LTL shipments were among that cargo that was pilfered.

 

LTL shipments are affected by many external factors, as are all shippers that rely on truck transport: electronic logging devices, driver shortages, fluctuating fuel rates, and competing demand. Such factors, along with increased demand, has raised LTL freight rates.

 

For the shippers, this means that they need to budget accordingly or find ways to economize. They can consolidate cargo internally or go external through freight brokers who can attain a more favorable freight rate and a better delivery time.

 

An even larger problem with LTL shipping is the smaller pool of available carriers that serve this market. For carriers, there’s more potential in the parcel or full-truckload market. For shippers requiring LTL shipments, a narrower pool of vendors means less negotiating power and less favorable freight rates.

 

Betting Supply and Demand with Supply Chain Strategy and Leadership

These factors point to the need for more strategic supply chain management and leadership. Such management is enhanced by technology that enables shippers to know what cargo they have and helps turn their LTL shipments into full truckload shipments. Conversely, it can help shippers work with carriers to better facilitate the transport of LTL shipments and negotiate better rates and delivery times.

 

Looking forward, we can expect that LTL will be front-of-mind for shippers, carriers, 3PLs and technology developers. The market niche is ripe for better and more efficient options to move LTL shipments.

 

Supply chain consultant A.T. Kearney may have posed the overall uncertainty best in their 2017 State of the Industry Report:

"For both shippers and carriers, the ultimate question is whether current conditions will cause sustained changes in industry structures. Will the full truckload market look more like the less-than-truckload market, with high infrastructure requirements and robust networks creating barriers to entry? Will shippers and carriers collaborate to reduce costs and grow capacity? Will autonomous technology – whether its driver assistance technology that improves safety and lowers insurance costs, truck platooning on highways, or fully autonomous trucks – cut costs for all shippers and relieve the driver shortage? Answers are still unclear, but we expect efforts and investments in all these areas to accelerate."

 

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