Less-than-truckload (LTL) freight revolves around shipments that weigh more than 150 pounds but do not rise to the need for a full truckload (FT). LTL freight consolidation refers to the combining of multiple LTL shipments to full a truck and takes advantage of the lower rates associated with FT. Since FT shipping is typically the least expensive over-the-road (OTR) mode, shippers see freight spend reductions when using freight consolidation. Unfortunately, failure to plan LTL consolidation efforts and use data will only add to costs, which may exceed the costs of just sending freight by LTL. Moreover, efficient use of consolidation can drive savings even further, contributing to better profit margins and carrier relationships. Shippers that wish to remain competitive and keep product price points under control must know how to approach LTL freight consolidation.
What Do Shippers Get Wrong About LTL Freight Consolidation or Misunderstand About the State of the LTL Industry?
Freight consolidation is about much more than just keeping shipments down in frequency; it is a requirement for meeting the demands of retailers. Retailers are requiring smaller but more frequent orders. This means shorter lead times and less product to fill a full truck. CPG shippers are being forced to use less-than-truckload (LTL) more often. Yet, LTL remains more expensive and time-invasive, especially with respect to multiple deliveries and finding available capacity.
Capacity woes have lessened over the last year, and rates are generally lower due to more capacity. However, the industry is on a precipice. The final mandated deadline for electronic logging devices (ELD) will arrive on December 16, 2019. Shippers that haven’t queried their carriers for full ELD compliance will risk a sharp decline in available capacity. As capacity tightens, LTL freight rates will soar, and they may surpass the 2018 peak capacity crunch levels.
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Effective Consolidation Depends on Careful Planning and Offers Major Benefits
Effective LTL freight consolidation can provide a protective effect against the peaks and lulls in LTL freight availability. While the same issue may present problems for FT carriers, the LTL market appears most at risk and has a history of problems. Take these examples from William B. Cassidy of the Journal of Commerce:
“LTL carrier Old Dominion Freight Line (ODFL), for example, had difficulty integrating new ELD software into its existing fleet management and safety software in early 2018. ODFL, which had used AOBRDs since 2010, asked for and was granted a 90-day waiver from the Federal Motor Carrier Safety Administration (FMCSA) that gave the operator time to work out the bugs.
For Southeastern, the AOBRD-to-ELD journey took six months, starting in May this year and ending Nov. 11. The Lexington, South Carolina-based regional carrier had to install new software and equipment in nearly 3,200 trucks and tractors and train more than 4,000 drivers who work from nearly 90 terminals from El Paso, Texas, to Norfolk, Virginia.”
LTL freight consolidation does offer additional benefits, including:
- Simplicity of freight pricing.
- Improved transit times, read faster shipping.
- Fewer touches to reduce risk.
- More shipment transparency.
- Fewer carrier interactions.
- Lower accessorial charges.
- Sustainable shipping practices.
- Increased service levels.
The facts and risks give rise to a new issue surrounding consolidation: how can shippers improve LTL freight consolidation activities?
How to Improve Freight Consolidation/Deconsolidation
Shippers may already have some processes in place to enable LTL freight consolidation, such as route optimization programs. Yet, the ELD mandate itself offers additional opportunities to apply consolidation and leverage its benefits. To reap the greatest rewards, shippers should follow these steps:
- Connect with carrier systems to understand truck routes, activities, and availability, using APIs and EDIs to share and collaborate.
- Take consolidation to the manufacturers, using dropshipping to move FT freight to the point closest to consumers, such as order fulfillment centers and store fronts-as-a-distribution center.
- Implement new freight classification and weighing processes, including DIM pricing models, to ensure freight rate accuracy.
- Leverage a Transportation Management System to connect with LTL carriers that enable consolidation into FT freight.
- Consider outsourcing transportation management to a third-party servicer, such as Cerasis, to ensure maximum use of consolidation and pooling of shipments.
- Use analytics to track and measure performance, holding carriers and LSPs accountable for delays or other issues.
- Integrate freight consolidation systems with your accounting management systems, identifying errors and recapturing costs along the way.
Improve Freight Management With Data-Driven Consolidation Now
The shipping industry is changing in the wake of growing e-commerce demand, uncertainty regarding international trade tariffs and regulations, and a general demand for faster, lower-cost service. LTL freight consolidation is one way shippers can meet the changes head-on and keep freight spend under control, but additional measures, such as exception management, will be needed to further refine efficiency and squeeze savings from every opportunity.