The freight industry represents one of the world’s most profitable sectors. The trucking industry alone generates revenue of over $700 billion annually. For those new to or unfamiliar with the world of freight, the specifics can be as overwhelming as the profits are staggering.
Let us help you by providing you a place to get a foothold in wrapping your head around the logistics industry behemoth. Read on to learn what less than truckload (LTL) shipping is, and how your business can benefit from LTL shipping services.
When the average layman thinks “logistics”, UPS or FedEx come to mind. But these are far from the only players in the shipping industry. In fact, these direct-to-consumer parcel-shipping companies aren’t even the tip of the iceberg when it comes to LTL shipping.
LTL shipping services have a unique set of governing practices. We’ll detail the many rules, policies, and cost-quoting practices of the industry below. First, though, let’s give less than truckload shipping some context. We’ll take a look at some basics of the freight industry, introduce you to the differences between carriers and brokers, dive into the nuances of LTL & freight class, and provide you with a crash course in successfully obtaining a LTL freight cost estimate.
The freight industry is a global commerce comprised of companies – both domestic and abroad – transporting goods by air, land, and sea. These commercial carriers utilize boats (shipping containers), trains, trucks, and planes to move goods from point A to point B for their clients. At Prestige Worldwide Logistics (PWL), we specialize in truck transportation. Freight transportation by truck can further be divided into the following categories: less than truckload (LTL) or full truckload. For the purposes of this article, we will be focusing on LTL shipping.
Carriers and brokers are often mistakenly used synonymously, so let’s set the record straight. Companies that own and operate trucks are known as freight carriers. In addition to truck drivers, freight carrying companies employ dispatchers, dock workers, customer service personnel, and many others. The freight carrying industry includes a range of different types of companies. Some LTL shipping companies are smaller outfits that specialize by region and industry with less manpower. These are referred to as “regional LTL carriers”. Examples of regional LTL carriers include NEMF, Dayton Freight Lines, AAA Cooper, Southeastern Freight Lines, and Pitt Ohio. Additionally, another segment of big-name freight-shipping powerhouses offer shipping services on a national scale. Examples of such Nationwide LTL carriers include FedEx Freight, UPS Freight, XPO, SAIA, ESTES, and RL Carriers.
Brokers, on the other hand, do not actually own or operate any trucks. This is a key distinction, and is important to remember when working with brokers. Brokers act as the liaison between clients interested in moving freight, and freight carriers with room on their trucks to do so. Another way to think about the carriers vs brokers distinction is that companies looking to move goods are clients of the brokers. Brokers, in turn, are the client of carriers. Brokers provide value to their clients by offering them cheaper transportation rates than they would be able to obtain on the open market. Brokers consolidate lots of volume for their clients, and therefore receive favorable rates to transport freight from carriers. Much of these savings are passed on to their clients, but freight brokers – like brokers in any industry – make money by taking a portion of each transaction.
LTL shipping services are essentially what they sound like. When a business ships its goods LTL, its freight fills less than an entire truck. The industry-specific measurements to be considered LTL are 12 square feet or less of truck space. In other words, six standard pallets stacked upright, side-to-side, as opposed to on top of each other. While it is certainly possible to ship amounts more than this, be warned it will likely result in an additional “overlength” fee. Be sure to request a quote from your freight broker in these scenarios (here at PWL, our contracts with carriers allow us to maintain LTL pricing for up to 28 square feet!).
LTL shipping schedules are primarily determined by carrier freight terminals. Such terminals are owned and operated by freight carrier companies. The first step in the shipping lifecycle begins when a company’s goods (the shipment) are picked up by a freight carrier and carted to the origin carrier freight terminal. The location from which the shipment is picked up is always known as the “shipper”. Next, the shipment will be unloaded from the first, local truck and reloaded onto a second truck who delivers it to the next carrier terminal. The final drop-off point is referred to as the “consignee”. The cycle proceeds like this until the shipment arrives at its final destination. It may be helpful to think of the shipping process like a track team running a relay race where the runners are the trucks, and the baton is the shipment.
Freight class of the goods being shipped is the primary criterion that determines the cost of shipping services. An object’s freight class is based on either its NMFC number or the density of the item. The resulting freight class number spectrum ranges from 50 to 500, where 50 is the least expensive cost of shipping, and 500 is the most expensive. Because so much rides on the accuracy of the shipment’s freight class, it is best to let your broker handle it if you aren’t absolutely certain.
You and your business will need the following 5 pieces of information for every LTL shipping estimate or quote:
1.The pickup (“shipper”) address or location
2. The delivery (“consignee”) address or location
3. Total weight of the shipment (goods + packaging + palleting)
4. The objects’ freight class (as described above)
5. Number of skids (a palette without bottom deck boards) and dimensional weight (“dims”)
Important to note is that standard less than truckload shipping services cover the cost of business to business or dock to dock. There will almost always be additional charges for shipments either picked up or dropped off at a residence.
The shipping industry is a complicated one that takes time and experience to learn. Even LTL shipping is a nuanced branch of the freight industry. Hopefully, using the information obtained from this blog, you now have the knowledge and confidence to get started. As you learn more and gain more first-hand experience, return to the PWL blog to delve into a wide range of topics!
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