Today LTL freight consolidation needs to be given serious consideration. The reason is simple, economics. LTL freight consolidation is the practice of withholding standard LTL shipments until there is enough freight to take advantage of truckload pricing. The less-than-truckload (“LTL”) freight industry operates within a highly dynamic landscape. Many manufacturers and distributors struggle to lower their freight cost with repeated LTL shipments to the same distribution centers or regional areas. This practice makes it difficult to improve profitability by not taking advantage of LTL freight consolidation. Truckload consolidation of LTL freight shipments save you (and your customers) money by taking advantage of truckload capacity. So is LTL freight consolidation right for you? Exploring this question involves some complexity, and the answer depends on your specific shipping needs.
The Consolidation of the LTL Industry
Less-than-truckload freight shipping dominated the trucking industry during the 1920s and 1930s and for several decades afterwards. Then two big changes occurred. Deregulation during the 1980s and a rise in international trade changed LTL freight shipping in North America significantly. Today the LTL sector operates as a $34.5 billion specialty within the much larger $700.4 billion trucking industry in the United States. Late last year a significant development occurred. The largest LTL firm in Europe, XPO Logistics, paid some $3 billion to acquire Conway, the second largest LTL operator in the USA. The five largest LTL firms in the United States today account for 52% of total LTL revenues. Another factor contributing to the complexity of the industry relates to firm operating areas. Today, many LTL firms operate only within specific, geographically defined regions. While they may cooperate with other carriers through interlining, they don’t necessarily transport freight on their own trucks outside designated limits.
Is Standard LTL Shipping or LTL Freight Consolidation Right For Your Business?
This depends on the specific needs of the shipper. Holding onto shipments to consolidate into larger LTL shipments highlights other issues. One is storage, does the shipper have floor space to store the goods until the LTL freight can be consolidated? Storing goods also decreases cash flow as goods that are not shipped cannot be invoiced. So understanding if LTL freight consolidation is right for you is multifaceted and specific to every shipper.
How LTL Carriers Base Their Minimum Rates
All LTL carriers maintain base rates established by the individual freight carrier. However, in addition to this charge, several other costs typically enter into the process of transporting freight. These expenses include the total weight of the shipment, the distance, and factors such as the class of freight, the fuel expended and the density of the shipment. Carriers usually add surcharges for performing additional services, such as transporting freight directly to a residence or into a restricted facility. In order to save money, some shippers seek ltl freight consolidation as a cost cutting alternative. LTL freight consolidation allows shippers to take advantage of “economies of scale”. When freight shipments ship along routes that include consolidation centers, where items from multiple sources are unloaded from several trucks and then reloaded into a single consolidated shipment into a truckload. This process requires both a high volume on the part of the consolidation center and technologically advanced logistical information. A lot of planning goes into LTL freight consolidation even though this process sometimes occurs within a 24-hour period. A freight specialist may assist shippers significantly by helping the company identify specific ways along a route to benefit from this high-tech process.
The Benefits of Negotiated Discounts
As experts in freight shipping, we can assist companies seeking to benefit from the process of LTL freight consolidation. For instance, even very large carriers will negotiate discounts under certain circumstances. Trucking companies generally maintain a lower overhead when they transport full high density loads. The process of LTL freight consolidation may offer big savings for several small volume shipping companies and at the same time assist the carrier. Ask us for a free freight analysis of your LTL freight shipping needs today!
Contact Freight-Specialist today if you need help consolidating your LTL freight.