Full truckload shipping is generally less expensive than other over the road transportation modes. Less-than-truckload (LTL) has more stops, touch points, and risk. It takes more time to get shipments to consumers. Remember time is money, and if your product sits in the back of an LTL van for several days, your consumers will flock to your competitors. Instead of throwing in the towel, shippers can leverage full truckload shipping to ship LTL shipments in the back of a full-size van or trailer. How? Well, it goes back to knowing when to put two and two together to make four, with four being full truckload and two being an LTL shipment.
The Problem: Shippers Using LTL-Exclusive Shipping Have Minimal, If Any, Profitability in Freight Spend
Shippers have been steeped with the topic of LTL shipping for years, including how to make better use of it, reduce freight spend and leverage technology. Unfortunately, the increased use of LTL shipping has resulted in an unusual problem; shippers are turning to LTL-exclusive shipments, which can significantly drive up freight spend. Yet, shippers should consider using a transportation consolidation program, as explained in the previous blog post, to gain better control over freight stand and stay profitable as shipping rates continue to rise.
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Although LTL rates have remained more expensive than full truckload freight, full truckload rates are on the rise. As explained by the Journal of Commerce, drive and truckload rates rose 17 to 25 percent in January 2018. In addition, analysis of contract and spot market prices revealed rising rates in medium-range hauls, 450 to 550 miles driven per lane.
Surging demand for full truckload inherently implies a forthcoming greater rate hike on LTL shipments, which are regulated by the National Motor Freight Traffic Association (NMFTA). However, the NMFTA is more likely to raise average rates in response to demand, and according to multiple sources, the capacity crunch stands on the brink of becoming full-fledge transportation crisis as more drivers are retiring, and the capacity is simply unavailable. Unfortunately, this is creating the perfect storm for shippers trying to stay competitive and make a profit in shipping.
The Solution: Freight Consolidation Transforms LTL Shipments into Full Truckload Freight
Consolidation programs, also known as retailers consolidation or multi-customer consolidation, as explained by Jeff McDermott of Logistics Viewpoints, is a go-to solution for combining multiple LTL shipments or parcels into full truckloads. In other words, the freight consolidation program increases volume to existing shipments by combining shipments from a given shipper or multiple shippers to reduce the overall number of miles traveled had the packages been sent via LTL or parcel shipping. This is essentially Intermodal shipping, but it is important to note that freight consolidation is essential to leveraging the full potential of full truckload shipping.
The benefits of freight consolidation have a direct impact on available market capacity. Freight consolidation does more than just combine shipments; it makes shipments more attractive to drivers and carriers. As a result, shippers employing freight consolidation tactics can access available capacity in full truckload and reduce costs. So, what does freight consolidation really mean for shippers beyond cost savings in shipping?
The Reward: Merging Shipments Levies the Shipper Playing Field
Take a moment to think about how freight consolidation rewards shippers. Rewards derive from the components integral to an effective freight consolidation program, which include:
- Connecting with other shippers who have LTL shipments ready to ship.
- Identifying the lowest-cost carrier for a given lane.
- Reviewing the driver and carrier chosen for past infractions and track record of transporting full truckload shipments.
- Using technology to manage the process when it involves multi-stop routing and keeping information updated in real-time.
- Deconsolidating the shipment at the destination, as explained by Brian Baklenko.
The components of a freight consolidation program require systems capable of broad scalability and visibility, such as cloud-based transportation management systems (TMS). Small and mid-sized shippers can leverage the power of TMS, much like the big-box retailers, by working with third-party logistics providers (3PLs) and taking advantage of available software-as-a-service (SaaS) platforms, like the Cerasis Rater.
Putting It All Together
Full truckload shipping rates are not regulated by the NMFTA, explains PNG Logistics, and as a result, shippers have an opportunity to take advantage of lower than LTL shipping rates through freight consolidation. LTL rates are expected to continue climbing, especially if an infrastructure bill is not passed in the coming months. Therefore, shippers need to begin preparing to use freight consolidation to tap into the value of the full truckload shipping by partnering with a 3PL sooner, not later.
So, what else can a shipper do to procure full truckload in tight capacity? We’ll answer that next.