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Less-than-truckload (LTL) carriers play a critical role in logistics. They efficiently move goods from various locations to destinations, often through a network of terminals and hubs.
LTL trucking makes up about 10% to 15% of the volume today with truckloads (FTL) carrying the remaining 85% to 90% on the road. While FTL freight is incredibly fragmented with many small and midsize carriers. LTL is far less fragmented. The top 20-40 carriers handle the majority of shipments and the LTL business has become even more consolidated since Yellow Corp (YRC Freight) declared bankruptcy and shut down operations.
Definition of Less-Than-Truckload (LTL) Shipping
The simplest definition of LTL shipping is that carriers are moving freight for multiple shippers. Unlike FTL, where a single shipment occupies an entire truck, LTL shipments are consolidated with other shipments to maximize the truck’s capacity. This method allows multiple shippers to share transportation costs, making it an economical option for shippers with smaller loads.
The Importance of LTL in Today’s Logistics and Supply Chains
LTL freight shipping has become increasingly important in modern logistics and supply chains due to its cost-effectiveness and flexibility. It allows businesses of all sizes to ship smaller quantities of goods without the expense of booking an entire truck. This is particularly beneficial for small to medium-sized enterprises (SMEs) that cannot fill a whole truckload.
LTL shipping plays a crucial role in eCommerce fulfillment, where a diverse range of products and order sizes must be delivered promptly.
Understanding LTL Operations
Efficient LTL operations require a smooth workflow. The trucking LTL network is highly dependent on hubs and distribution centers where loads are sorted and consolidated for effective routing.
Pickup and Consolidation
The LTL shipping process begins with door-to-terminal pickup, where the carrier collects freight from the shipper’s location. This freight is then transported to a terminal where consolidation occurs.
At the terminal, shipments from various shippers are combined and loaded onto trailers in a way that maximizes space and ensures efficient routing. This consolidation process is crucial for optimizing the load and reducing transportation costs.
Transportation and Hub Network
Once consolidated, LTL shipments are transported through a network of terminals and hubs. These hubs serve as pivotal points where freight is sorted, re-routed, and transferred to the next leg of its journey.
LTL freight carriers utilize various modes of transportation, including trucking and rail, to move shipments efficiently across long distances. The hub-and-spoke model enables carriers to streamline operations and maintain flexibility in handling different shipment volumes and destinations.
Delivery and Deconsolidation
Upon reaching the destination terminal, the deconsolidation process begins. Shipments are sorted and separated based on their final delivery addresses. The freight is then loaded onto local delivery trucks for the last-mile delivery to the consignee.
One thing to note is that we’re seeing an increase in LTL carriers adding final-mile delivery services. The most expensive part of the shipping process, last-mile delivery also offers revenue growth for carriers.
Preparing Shipments for LTL Carriers
Proper preparation of shipments is essential for smooth LTL operations. This includes adhering to packaging and labeling requirements to prevent damage and ensure efficient handling. Packaging and labeling are standardized. A good overview is from the National Motor Freight Traffic Association (NMFTA), which recently updated its Essential Guide to Minimum Packaging Requirements to optimize LTL shipments.
Palletization is a best practice for LTL freight to help with weight distribution and protect cargo during transit. For intermodal transportation, where goods may switch between trucking, rail, and other modes, containerization and careful coordination of mixed modes are vital for seamless movement across the supply chain.
Typical documentation for LTL shipments include:
- Bill of Lading (BOL): This is the most crucial document for LTL shipments. It serves as a receipt, contract, and document of title.
- Commercial Invoice: Required for shipments crossing international borders, detailing the goods’ value and description.
- Packing List: Itemizes the contents of each package in the shipment.
- Proof of Delivery (POD): Confirms the shipment was delivered successfully.
- Freight Bill: Details the charges for the shipment.
- Certificate of Origin: Required for international shipments to verify where goods originated.
- Customs Forms: Necessary for international shipments (e.g., customs declaration forms).
- Material Safety Data Sheet (MSDS): Required for hazardous materials.
- Insurance Certificate: If additional insurance is purchased for the shipment.
- Delivery Receipt: Signed by the recipient upon delivery.
Documentation is increasingly becoming electronic. C.H. Robison, for instance, is implementing an electronic BOL (eBOL) process for its largest LTL carriers. NMFTA is developing an application programming interface (API) to cover the full lifecycle of LTL shipments from quote to cash.
LTL Shipping in the E-Commerce Era
How big is eCommerce? It’s grown considerably in each of the past 10 years and is forecast to increase by 53% between now and 2029, according to Statista Market Insights. U.S. eCommerce, already accounting for $657 billion in sales is expected to grow to $1.9 trillion by 2029. July 2024’s Amazon Prime Day alone racked up $14.2 billion in 48 hours — up 11% from last year, according to Adobe. It’s estimated that as much as 95% of Amazon FBA freight is LTL.
Such continued market growth provides significant opportunities for LTL carriers, especially those catering to the eCommerce industry. We’re seeing a marked increase in carriers offering white glove and other accessorial services, especially for large and bulky items that require installation. For example, customers ordering furniture or big-screen TVs want carriers to cross the threshold and bring items inside. Combining last-mile delivery and white glove service, often including installation, is a significant growth area for carriers.
However, the increased volume and fragmented shipments also create more complex logistics. For example, consumers have increasing expectations for fast delivery, which is forcing some carriers to rethink their operations. Speed can impact efficiency, which lowers margins.
Core Aspects of LTL Shipping
Let’s answer some of the key questions about the core aspects of LTL shipping.
Requirements and Capacity
How do you determine LTL freight class?
LTL freight class is determined based on the National Motor Freight Classification (NMFC) system, which considers four main factors:
- Density
- Stowability
- Handling
- Liability
Many carriers are moving to density-based pricing, which primarily focuses on the shipment’s density.
The NMFC assigns a class from 50 to 500, with lower classes generally being less expensive to ship. To determine the class:
- Calculate the density of your shipment (weight divided by volume)
- Consider any special handling requirements
- Assess the item’s liability (fragility, value, etc.)
Some commodities have pre-assigned freight classes per NFMC, such as boxed clothing (class 100) or fragile glass products (class 300).
What are LTL requirements?
LTL weight guidelines can vary greatly. While NFMC says weights range from 100 to 10,000 pounds, some carriers — like FedEx — only accept LTL freight of at least 150 pounds. Some carriers will also accept much heavier loads, up to 15,000 or even 20,000 pounds.
Shipment must be properly packaged and labeled goods and include an accurate description of goods with NFMC codes and the required documentation. In most cases, the freight must be palletized.
What is the minimum weight to ship LTL?
The minimum weight for LTL shipments can vary by carrier, but it’s typically around 150 pounds. Some carriers have minimum charges for freight weighing less than 150 pounds.
What is the maximum weight for a pallet on LTL?
The maximum weight for a single pallet in LTL shipping typically ranges from 1,500 to 4,000 pounds depending on the carrier and their equipment. However, most carriers prefer pallets to weigh 2,000 pounds or less for ease of handling and safety reasons.
How many pallets are considered LTL?
LTL shipments are typically defined by weight rather than pallet count. However, as a general guideline:
- One to six pallets are usually considered LTL
- Seven to 28 pallets often fall into a “volume LTL” or “partial truckload” category
- 29+ pallets would typically be considered a full truckload (FTL) shipment
These numbers can vary based on pallet size, weight, and carrier policies. Some carriers may have specific pallet count limits for their LTL services.
Time Frame and Less Than Truckload Tracking
How long does LTL shipping take?
The time frame for LTL shipping can vary based on factors such as distance, consolidation needs, and carrier schedules. On average, LTL shipments take between one to five days for delivery. Keep in mind that each carrier has its network of routes and terminals. The network efficiency impacts how quickly shipments get picked up, transferred between terminals, and delivered.
How are LTL shipments tracked?
A Deloitte study revealed that 83% of consumers consider shipment tracking crucial in making purchase decisions. Real-time tracking has become essential. To be competitive, carriers must offer tLTL freight racking systems that provide real-time updates on the shipment’s location and status, allowing shippers, consignees, and consumers to monitor progress and plan accordingly.
Costs and Pricing
Pricing for LTL freight varies widely, depending on carrier, volume, density, and a variety of other factors. Calculating the costs balances these factors and can also vary depending on both capacity and demand. As track tonnage drops, carriers often introduce lower pricing tiers. Dynamic pricing reflects market conditions.
What Are Some Strategies to Reduce LTL Costs for Carriers?
LTL Carriers are employing a variety of strategies to lower costs and avoid leaving money on the table.
What are dimensioners?
Dimensioners can measure the volume and weight of shipments, enabling carriers to charge based on the amount of space shipments take up. These devices provide accurate measurements and enable carriers to plan and load shipments more efficiently.
How can route optimization help?
LTL is much more complex than FLT and incredibly challenging to do perfectly, especially when you think about all the possible logistics that have to align to juggle multiple pickups, products, and customer requirements. Carriers must optimize time vs. miles, time of day, service levels, drive time, fuel consumption, and a host of other factors. Drivers also have a finite number of hours they can drive each day, so maximizing travel is crucial to cost control and efficiency.
Dynamic routing and telematics are key to optimization. Carriers today are using technology to allow for adjustments on the fly due to weather or traffic patterns — automatically accounting for potential restrictions such as low overpasses or bridge weight concerns. Predictive analytics are anticipating delays or issues based on current conditions and historical performance, providing a more protective approach to changing conditions.
How does equipment allocation impact costs?
Newer trucks are more fuel-efficient and aerodynamic, which can reduce overall costs. LTL carriers spend more time on side roads and deliveries compared to FYL highway miles, so fuel-efficient equipment is essential to reducing costs.
What role do driver coaching and technology play?
How operators drive is a big factor in both safety and fuel economy. Telematics can help record driver behavior, enabling carriers to provide guidance and coaching for best practices.
Coaching can also help with safety, a huge risk in the trucking industry. We’ve seen more than a few nuclear verdicts in court cases, multi-million-dollar settlements, even in cases where there was no evidence of fault. This is another area where the right technology can play a big role. Cameras can produce evidence of activity and help mitigate legal actions and be used for coaching.
Coaching and technology can improve driver behavior, reducing risk, insurance costs, and reputation.
How is LTL Charged: Additional Considerations
LTL shipping charges can include additional fees for services, such as:
- Inside pickup and inside delivery
- Residential freight delivery
- Liftgate delivery
- Special equipment
- Limited access
Understanding these additional considerations helps shippers and carriers plan costs and services more accurately.
Understanding General Rate Increases in LTL
General Rate Increases (GRIs) are periodic adjustments made by carriers to their shipping rates — reflecting rising operational costs such as fuel, labor, and infrastructure. GRIs are typically applied to general tariff codes and may vary by lane and weight tiers.
Some LTL agreements with shippers work off of base rate schedules with adjustments for GRIs, although contracts are negotiations between shippers and carriers so they can vary widely. Rates have generally gone down due to an oversupply of capacity and market conditions.
In the post-pandemic capacity shortage, GRIs had a huge impact. Shippers had trouble finding carriers that could handle their loads, so rates rose considerably. Carriers could set their own price points. But, the pendulum has swung the other way. Truck tonnage has dropped nearly every month in 2024 compared to prior years. The American Trucking Associations (ATA) reported 13 consecutive months of year-over-year declines through March. With thin margins, some notable trucking companies have struggled and others have shut down operations.
Strategies to Enhance LTL Shipment Attractiveness
As carriers look for ways to expand revenue opportunities and become the carrier of choice for shippers, service becomes even more important. Lower rates may secure loads, but performance is what keeps clients.
Clients are tracking all sorts of metrics beyond price, including:
- On-time deliveries
- Over, short, and damaged (OD&D)
- Claims
- Late deliveries
This is especially important in eCommerce business. When consumers place an order, they expect every order to be delivered on time. While 100% compliance may be unreachable, your performance reflects on the shipper. Their reputation is on the line.
OTIF (On-time and in full), first used by Walmart in evaluating suppliers, has become a common metric. Dip below 70% for prepaid less than truckload freight and it can impact your contract. So, carriers looking to attract more business need to measure their performance and ensure they meet increasingly stringent requirements.
With significant capacity, shippers today have a lot of choices. Somebody will pick up their loads. This has made becoming a carrier of choice more difficult and spurring increased competition. For example, Roadrunner is now offering free LTL if shipments don’t arrive as promised on 30 lanes.
Shippers can also be proactive to attract better quotes. For example, by minimizing detention and waiting times, LTL and FTL carriers see improved efficiencies. Sitting at docks waiting to queue or unload is frustrating and costly — keeping drivers off the road and possibly delaying other shipments.
The Future of LTL Shipping
Technology
Less than truckload carriers are increasingly adopting technology to create efficiencies and reduce costs. Automation and data analytics have become core components rather than nice-to-have. AI and machine learning are becoming mainstream, helping to more accurately forecast rates farther in advance and handle routine tasks, freeing up carriers for more strategic jobs.
AI, IoT, sensors, and cameras are also improving driver behavior and safety. AI computer vision in the cab is detecting unsafe behavior. IoT is enabling pinpoint tracking. Sensors ensure temperature stability for sensitive loads. Fleet telematics monitor equipment and engine health while AI optimizes vehicle maintenance to avoid expensive breakdowns.
Each of these technologies is helping carriers improve efficiency and keep costs under control.
Sustainability and Alternate Fuels
Companies are being held more accountable for sustainability and are more sensitive to eco-friendly practices. Harvard Business Review’s survey of 350,000 U.S. consumers reports that sustainable practices influence purchase decisions, especially among younger consumers. It impacts brand choice and trust. As such, more than half of companies surveyed by Morgan Stanley said sustainability was a core factor in business decisions.
Carriers can make themselves more attractive by using route optimization and vehicle technology to reduce fuel consumption. The use of alternative fuel sources, such as biofuels and electric-powered vehicles can help their clients live up to customer expectations. However, there are still considerable challenges with fueling and charging infrastructure that must be overcome.
Evolving Regulatory Landscape
LTL operations must also manage shifting regulatory and governmental requirements.
For example, many drivers are often owner/operators who haul freight as independent contractors. California legislators are pushing to reclassify independent contractors as employees when they meet much lower thresholds than in the past. While this is a larger issue for FTL carriers, this could significantly impact costs and operations.
Carriers are also being forced to meet tighter emission restrictions as legislation increasingly focuses on moving from internal combustion engines to electrification. 13 states and the District of Columbia have now adopted electric vehicle mandates. Most notable is California, which calls for all trucks to be zero-emissions by 2045.
Collaboration Between Regional Carriers
We’re already seeing additional collaboration between regional carriers, working together across regionals. By extending partnerships, these carriers can compete more effectively with national carriers, reducing the need for shippers to deal with multiple carriers.
Shared terminals and cross-docking can also reduce infrastructure costs and improve load balancing.
This practice can also help regional carriers to reduce risk. Diversification across multiple regions reduces the dependency on local market conditions.
Moden Logistics With LTL
LTL shipping plays a crucial role in modern logistics, offering cost-effective solutions for businesses of all sizes. As eCommerce continues to grow, LTL carriers are adapting to meet changing demands and implementing technology to squeeze out ever-greater efficiencies.
By staying agile and embracing these constantly changing marketplaces, LTL carriers can continue to provide efficient, reliable — and profitable — shipping solutions into the future.
Frequently Asked Questions — FAQs
What are LTL capabilities?
LTL carriers can transport smaller shipments from multiple customers in a single truck, offering cost-effective shipping for loads typically between 150 to 10,000 pounds. They provide services such as pickup, consolidation, transportation through a hub network, and final delivery.
What is the benefit of LTL?
Less than truckload shipping allows businesses to ship smaller quantities of goods cost-effectively, sharing transportation expenses with other shippers. It’s particularly beneficial for small to medium-sized enterprises and eCommerce businesses that don’t require full truckloads.
What are LTL shipping requirements?
LTL shipping typically requires proper packaging, labeling, and documentation. Shipments should generally be palletized and weigh between 150 to 10,000 pounds, though exact requirements may vary by carrier.
What are the challenges of shipping LTL?
Challenges include longer transit times due to multiple stops, potential for damage during handling, complex pricing structures, and the need for efficient route optimization. Additionally, meeting increasingly stringent performance metrics like on-time delivery is crucial.
What is the difference between LTL and freight?
LTL refers specifically to shipments that don’t fill an entire truck, while freight is a broader term that can include both LTL and FTL shipments.