Thanks to the growing popularity of online shopping, the trucking industry has gotten yet another boost in demand. Specifically, there’s been an increase in LTL freight, a method of shipment that can be a lucrative venture for your trucking business.
In this post, we’ll discuss the LTL definition, its importance in the logistics sector, and what it means for you as a trucker. Keep reading to see if this could be your next best route if you haven’t considered it yet!
What is LTL freight?
LTL stands for “less-than-truckload” since it’s a shipping method where the shipper doesn’t occupy the entire truck space. Instead, multiple shippers or sellers share the same cargo to deliver their goods that are larger than parcels.
For example, a distributor of furniture accessories has a shipment that’s only a quarter of a full cargo size. In this case, it’s not efficient to pay for an entire truck’s shipping cost since 75% of the cargo space will be empty.
For this, LTL trucks come to the rescue. The furniture accessories distributor can ship their products and only pay for the space or weight it will occupy inside the truck. The rest of the cargo space can be shared with other shippers who also have smaller loads that don’t need an entire truck to themselves.
The best thing about this setup is that shippers can save money with LTL, meaning they split the entire cost of shipping between themselves based on the size of their respective loads.
Overall, shipments that are within freight class categories of 150 to 15,000 pounds qualify for LTL truck transportation. Take note that loads under 150 pounds qualify for parcel shipping, not LTL.
Importance of LTL shipments for businesses
There’s so much potential and revenue in LTL freight, meaning it has become indispensable in the supply chain. While it’s a great opportunity for truckers like you, it’s also a key piece of the puzzle among business owners.
Here’s why less-than-truckload shipping is a game-changer for businesses not just in the US but around the world:
1. Faster delivery
Instead of waiting for sufficient orders to reach a full truckload, businesses can now ship smaller loads through LTL immediately. This way, their goods can reach customers faster, boosting their revenue and preventing them from losing customers due to long waiting periods.
2. Safer transportation
Businesses that ship oddly shaped or fragile items prefer LTL trucks since they offer safer handling and shipping of their products. It’s because most less-than-truckload shipments are wrapped in pallets before being loaded onto the trucks. This makes it safer during transportation, especially on long-haul deliveries.
3. Lower shipping costs
As we’ve mentioned earlier, LTL shipping helps business owners save money while enjoying fast delivery of their goods. After all, the cost of LTL in trucking is proportional to the weight and dimensions of the load they are shipping.
4. Convenient shipment tracking
Easy tracking is one of the conveniences of LTL trucking, meaning businesses can track their shipments in real-time. They can see its location, freight status, and more right on their mobile devices. Depending on their choice of dispatch service, they will enjoy various tracking solutions.
What does LTL mean for your trucking business?
Here’s the bigger question now: what does LTL mean in trucking revenue? For truckers, here are some reasons why less-than-truckload shipments can bring good business:
1. Diversifying shipping services
The trucking industry is mired with long payment cycles and seasonal fluctuations. This is why fleet managers always aim to diversify their shipping services to keep their trucks on the road whenever the demand shifts.
In this case, freight LTL trucking can give fleets more income sources instead of sticking to just one type of shipping.
And speaking of long payment cycles, LTL isn’t exempt from this problem. If you decide to get into LTL shipping, you can also consider partnering with a factoring for trucking company to turn your invoices into instant cash. This way, you can get your much-needed working capital immediately so you can deliver more LTL freights.
2. Less financial risk
LTL shipments have lower risks compared to FTL (full truckload) freight. Most goods shipped through LTL aren’t as valuable as those who got for FTL or specialty cargo. This means that truckers will have to worry less about potential losses due to unforeseen circumstances.
3. Great opportunity for networking
Getting into LTL shipping could open doors for entry-level truckers who are looking to build relationships with brokers and shippers. This way, they can easily find repeat clients, which will make their revenue more predictable.
4. Access to a large customer base
We have the boom of online shopping to thank for the huge client base in LTL shipping. As they say, if you bought it, a trucker brought it!
While LTL shipping isn’t fully invincible to seasonal fluctuations, the demand remains profitable for many fleets. After all, America has a ton of small and medium-sized businesses shipping their goods – much of which is through LTL services.
LTL trucking vs. FTL trucking
FTL, or full truckload freight, is often regarded as the opposite of LTL. As it’s called, a full truckload requires a shipper to occupy most – if not the entirety – of the cargo space. And in turn, the shipper will be the lone client to pay for the shipment’s transportation.
So when is FTL the better choice? For businesses shipping huge inventories of their products or transporting loads heavier than 15,000 pounds.
Take note that shippers don’t necessarily have to fill the truck to the brim just to qualify for FTL. They can choose to reserve an FTL service if they don’t want their products to mix with another business’ goods. Also, some shippers will opt for FTL service if they are transporting high-value, time-sensitive, fragile, or specialty items that require extra care.
Another huge difference of LTL and FTL is their delivery times. With FTL, the trucker can pick up your shipment directly and deliver it straight away.
However, there are extra steps when it comes to LTL freight shipping. With LTL shipping, the trucker has to make multiple stops to collect all the scheduled loads from different businesses in various areas. This means LTL freights usually take more time to arrive compared to FTLs with the same distance and destination.
Challenges in the LTL freight industry
Less-than-truckload freight has a lot of benefits for both businesses and truckers. However, it also has a share of challenges, including the following:
1. Long and unreliable transit times
As we’ve mentioned earlier, LTL shipping can have long transit times. It’s because carriers have to pick up loads from various terminals and on different schedules before they can head to their destinations.
The more pallets and number of shippers sharing a truck, the longer it will take for the carrier to fill its entire cargo. And for truckers, this also means they will have to spend more time delivering cargo, which will limit their opportunity to get more hauls.
2. Complicated accessorial fees
The accessorial fees or extra charges levied on LTL shipments will make it tricky for shippers to control their shipping costs. If that’s not already a challenge, accessorial fees are also ever-changing, which makes it difficult for shippers to calculate the fees they will expect.
To minimize this, shippers have to practice efficient loading and unloading practices, so they will avoid detention fees. At the same time, they should partner with a carrier that will get their goods moving in the most cost-effective and time-efficient way.
3. Not understanding LTL freight liability
One thing many shippers don’t understand is that liability is different from insurance coverage.
For starters, liability is the amount the trucker or carrier will pay in case the goods get damaged during shipping. It’s usually priced per pound, say $15 for every pound of your shipment.
However, if your shipment has a per-pound value of $50, then you’re bound to lose a lot of money that you won’t be able to recover.
Take note that a carrier’s level of liability reflects on their LTL shipping rates. So if their rates are extremely cheap (as with most Freight All Kinds or FAK), it also means they won’t be paying much in case your shipment didn’t make it to the destination safely.
With this, shippers should partner with carriers who have a higher freight classification and a comprehensive insurance coverage. In case your good got damaged during shipping, their insurance will pay for its entire value.
4. Picking the right freight classification
The National Motor Freight Classification or NMFC, also known as freight class, is a standardized system that groups shipments based on several factors.
Typically, shipments will be classified based on their density, liability, ease of handling, and stowability. For LTL shipments, there are 18 freight classes, starting from Class 50 to Class 500.
For example, a shipment of ping pong balls (low-density items) have a higher freight class compared to metal sheets (high-density items). Take note that the lower the freight class, the lower the shipping rates will be as well. It’s because high-density items take up less space for the same weight, making them cheaper to ship.
Take note that choosing the wrong freight class means you’re getting an incorrect level of liability for your shipment. Again, if your goods get damaged, the carrier will only pay for the liability level attached to that freight class.
Interestingly, some shippers are willing to take this gamble to save on shipping fees. But then again, proceed at your own risk.
Frequently asked questions about LTL trucking
What does LTL freight mean for environmental impact?
LTL shipping is more eco-friendly than other options since it allows multiple shipments to be delivered in just one truck. This means carriers will have a reduced carbon footprint compared to multiple vans delivering small shipments at the same time.
What is LTL in trucking’s difference with LCL?
LTL is similar to LCL or less-than-container freight in a sense that they both deliver multiple shipments from various shippers in just one vehicle. The shipping rate is priced based on the weight and size of the load, not to mention that shippers only pay for the space they occupy inside the truck.
The only difference is that LTL is for land freight, and LCL is for ocean freight.
What is LTL shipping used for? What type of products can you ship?
There are a wide range of products that can be shipped through LTL, but mostly are non-perishable and will remain in good condition despite the long transit times. This includes electronic products, garments, furniture, machinery, auto parts, and more.
What is LTL trucking’s documentation requirements?
For most LTL shipments, carriers and shippers need to produce a Bill of Lading (BOL), packing list, shipping labels, freight class information, and insurance documents. Special permits might also be needed, depending on the type of goods that will be shipped.
What can fleet owners do if trucking LTL invoices take too long to get paid?
LTL shipment invoices can take weeks or even months to get paid. Still, this doesn’t mean truckers have to suffer from the long payment cycles. Instead, they can partner with a factoring trucking company to turn their invoices into cash within 1 to 2 days.
Streamline your freight payments with the help of Factoring Express!
Whether you’re in LTL, FTL, or other types of shipping services, our factoring company can be your partner in ensuring a steady cash flow for your trucking business.
Here at Factoring Express, we can fund your accounts receivable in as fast as 24 hours after your account approval. We can advance up to 97% of your total freight invoice amount and we’ll be taking over the collections process, so you can focus on delivering more shipments.
Contact us today to learn more about our factoring services and how we can help. You’ll also enjoy a 1-week free trial when you sign up now!
