Over 120 years ago in Brooklyn, two brothers, Jack and Gus Mack, founded America's first trucking corporation: Mack Trucks. Since then, trucking has become a cornerstone of the US economy, moving nearly, three-quarters of the nation's freight and generating over $940 billion in gross freight revenue annually.
Approximately 25% of these shipments are LTL (Less Than Truckload), which involves transporting products or goods that don't require a full truckload, but rather only need a portion of the truck space. This method consolidates multiple smaller shipments onto a single truck, resulting in cost savings and faster deliveries.
LTL shipping is ideal for brands building an ecommerce strategy around products weighing between 150 and 15,000 pounds. This strategy not only cuts costs but also enhances security, provides tracking, and offers specialized services.
At Spreetail, LTL shipping is one of the ecommerce services we use to meet the unique needs of our brand partners. In this article, we share what we have learned and dive into why LTL is the optimal choice for transporting smaller freight shipments, business benefits, and a full breakdown of cost formulas.
Why Brands Choose LTL Over Other Delivery Options
LTL is essential for items that weigh over 150 pounds or have a dimensional value greater than 165. This dimensional value is calculated as:
(2 x the smallest side of the package) + (2 x the second smallest side) + (the largest side).
Shipping big-and-bulky products via small parcel networks can incur significant unauthorized charges, making LTL a more economical and practical choice.
Challenges with LTL
LTL shipping comes with its own set of challenges. LTL carriers typically operate only Monday through Friday, which can result in slower transit and delivery speeds compared to small parcel services. Due to the size of the items, an average trailer can usually only accommodate about 26 pallets, limiting the volume of goods that can be transported in a single shipment.
Benefits of LTL Shipping
- Increased Security: Most LTL shipments are palletized before loading onto the truck. A well-packed pallet is more secure than shipments with numerous smaller units, reducing the risk of damage during transit.
- Cost-Effective: Since LTL shipments occupy only a portion of the truck's space, businesses save money by not paying for an entire truck, but only for that individual space that their items take up. This makes LTL a highly cost-effective option within an ecommerce growth strategy for brands shipping smaller freight loads.
- Robust Tracking: LTL carriers provide enhanced tracking capabilities, including detailed information such as PO numbers, shipment reference numbers, PRO numbers, pick-up dates, and lading numbers. This ensures that shippers can closely monitor their shipments throughout the transit process.
- Service Options: LTL shipping offers access to a variety of specialized services, such as lift-gates, easy pickup, and quick deliveries. These services can simplify the logistics process and enhance the overall shipping experience for businesses and their customers.
LTL Rate Factors
When determining the rates for LTL shipping, several critical factors come into play. These can affect costs depending on the:
- Mode: Every LTL shipment can be expedited, usually for an extra fee.
- Dimension: The shipment’s weight and size determine the class of freight, which directly affects its rate.
- Location: The distance between the source and destination plays a key role. The farther the distance, the greater the price.
Seller Specific Requirements
When shipping via LTL, there are specific limitations on the number of boxes per shipment. A single LTL shipment cannot exceed 4,999 boxes. If you need to ship more than this limit, you must create an additional shipment.
Pallet Requirements
To ensure the safe transport of goods, LTL shipments must adhere to strict pallet requirements. Here are key guidelines to keep in mind:
- Pallet Specifications: Use 4-way access, 40-inch x 48-inch wooden pallets. This standard size facilitates easy handling and stability during transit.
- Material Restrictions: Pallets made of fragile materials such as particle board or cardboard are not acceptable. These materials can compromise the integrity of the shipment. If a single large unit does not fit on a 40-inch x 48-inch pallet, select a pallet type and size that appropriately accommodates the unit.
- B-Grade GMA (Grocery Manufacturers Association) Standard Pallets: These pallets, regardless of the material (composite, plywood, lumber, etc.), must meet the following criteria:
- At least four boards at the bottom
- Six to seven boards at the top, depending on board width
- 4-way entry for easy access
- Stringers for additional support
Pallet Condition
It's crucial to ensure that pallets are in proper condition before shipping. Damaged and broken pallets will be rejected at the dock, incurring additional costs for the seller. To avoid this, inspect pallets thoroughly to ensure they meet the required standards and are free from any defects.
Following these guidelines helps ensure that your LTL shipments are handled securely and in compliance with carrier requirements.
Crunching the Numbers
The cost savings of LTL shipping can be significant for businesses, especially those dealing with small to medium-sized freight. Here are some key aspects highlighting the potential cost-saving benefits:
- Pay for Only What You Use: Unlike Full Truckload (FTL) shipping, where you pay for the entire truck, LTL shipping charges you only for the portion of the truck space that your freight occupies. This is particularly cost-effective for shipments that do not require a full truckload, leading to significant savings.
- Shared Costs: Since LTL shipping involves combining multiple shipments from different shippers into one truck, the overall transportation costs are distributed among all the shippers. This shared cost model helps reduce the individual shipping costs for each business.
- Lower Freight Rates: LTL carriers often offer lower freight rates compared to FTL for smaller shipments. This is because the cost of transporting a partially loaded truck is spread out among multiple shippers, making it more economical.
- Reduced Inventory Carrying Costs: With more frequent shipments at lower costs, businesses can maintain lower inventory levels and reduce the expenses associated with storing substantial amounts of stock. This just-in-time inventory approach helps in reducing warehousing costs.
- Minimized Handling and Damage Costs: LTL shipments are usually consolidated onto pallets, reducing the risk of damage compared to shipping loose items. Lower damage rates mean fewer costs associated with returns, replacements, and customer dissatisfaction.
- Access to Additional Services: Many LTL carriers offer value-added services such as lift-gate service, inside delivery, and residential pickup and delivery. These services can help avoid the costs and logistical challenges of handling these tasks independently.
- Fuel Surcharges: LTL shipping typically involves shorter routes and more efficient fuel usage due to optimized routes for multiple shipments. This can result in lower fuel surcharges compared to longer, less optimized routes in FTL shipping.
Calculating Costs
LTL shipping costs involve several factors and can vary based on carrier, shipment details, and additional services required. To simplify things, let’s look at a basic formula and the key components that contribute to the total cost:
Basic Formula:
LTL Shipping Cost = Base Rate + Freight Class Surcharge + Fuel Surcharge + Accessorial Charges + Additional Fees
Key Components:
- Base Rate: The base rate is determined by the carrier based on the weight and distance of the shipment. It's calculated using the following formula: Base Rate = Weight (in pounds) × Rate Per Pound
- Freight Class Surcharge: LTL freight is classified into different categories classes) based on several factors such as density, stowability, handling, and liability. These classes range from 50 to 500, with higher classes typically being more expensive. The classification is determined by the National Motor Freight Classification (NMFC) system.
- Fuel Surcharge: This is a variable charge based on current fuel prices, often expressed as a percentage of the base rate. The formula for calculating the fuel surcharge is: Fuel Surcharge = Base Rate x Fuel Surcharge Percentage
- Accessorial Charges: These are additional charges for extra services required during shipping, such as lift-gate service, inside delivery, residential delivery, and appointment scheduling. The specific accessorial charges will vary depending on the unique requirements of the shipment.
Other fees include minimum charge, reweigh/reclassification fees, detention fees, etc.
For example, assume you have a shipment weighing 1,000 pounds, traveling 500 miles, classified as freight class 100, with a base rate of $0.50 per pound, a fuel surcharge of 10%, and a lift-gate service charge of $50.
- Base Rate: 1,000 lbs. × $0.50/lb. = $500
- Fuel Surcharge: $500×0.10 = $50
- Lift-Gate Service = $50
- Total Cost: $600
By understanding these components, brands can make smarter shipping decisions that support their broader ecommerce strategy.
How Spreetail Utilizes LTL and Its Benefits for Our Brands
At Spreetail, our strategic use of LTL carriers ensures that even our most sizable products are transported safely and securely, maintaining the integrity of each shipment throughout the delivery process and minimizing damage rates.
"We redefine logistics excellence through our optimized LTL network, achieving an average click-to-delivery time of 4-5 days, with just 3 days in transit—far surpassing the industry standard of 7-10 days. Our commitment to efficiency not only lowers costs but also minimizes damage rates to a remarkable 0.8%, well below the industry average of 1-2%. These achievements underscore our dedication to delivering value and fostering customer loyalty through unparalleled service and reliability."
- Jacob Sweetwood, Spreetail Director of Outbound Transportation
As the landscape of ecommerce evolves, so does our commitment to meeting emerging trends. By advocating for and implementing advancements within LTL shipping, Spreetail continues building ecommerce services that set new standards and reshape industry norms. This proactive stance aligns with customer expectations and reinforces our dedication to providing exceptional service and ensuring a seamless experience for all our brands.
If you would like to know more about what makes Spreetail large item specialists, talk with one of our buyers to get a complimentary report on where your brand could be cutting costs while enhancing efficiency.
