Is LTL Freight Shipping Cost-Effective?

Picture this: as a shipper, you have limited resources but high demand from the customers you need to keep happy, which is proving a challenge. Picking a shipping method that isn't just cost-effective, but also results in long-term savings, is of the utmost importance. So how do you pick the best shipping method? Luckily, we've done the research for you…Less than truckload (LTL) shipping is a shipping mode where trucking companies consolidate multiple shipments to maximize the trailer’s space. LTL freight does not require the entire capacity of the truckload trailer, meaning it weighs less than 7,500 pounds and less than 12 feet of trailer space. Since you are only paying for the space your shipment will take up, not the entire truck, LTL shipping costs can be significantly lower than methods like paying for a full truckload (FTL). This means LTL shipments have less wasted space and are more economical. In this blog, we’ll explore how LTL freight works, dig into its advantages and potential drawbacks, and determine if LTL freight shipping is a cost-effective shipping solution.

How LTL freight shipping works

With LTL shipping, you are only paying for the space your shipment will take up, not the entire truck. What exactly does this mean? First, it’s important to understand how LTL freight shipping actually works. Your shipment is picked up and dropped off at a central hub where your shipment is unloaded and packed with other shipments into a long-haul truck. This truck then drops your shipment off at a freight terminal where carriers arrange shipments on various trucks depending on direction and route. Once your shipment reaches the destination terminal, it’s then placed onto a local delivery truck that will take your shipment to its final destination.

How much does LTL shipping cost?

Since your shipment is combined with other shipments at a central hub, LTL freight shipping costs can be significantly lower than methods like full truckload (FTL). FTL shipping, commonly referred to as truckload (TL) shipping, is a shipping mode that utilizes the entire space or weight of a truck’s trailer and goes directly from the pickup location to the destination. With FTL, you pay for the full truckload, regardless of whether or not you fill the entire space.A recent Flock Freight study found that nearly half of truckloads in 2022 moved partially empty – basically an equivalent of 1 in 5 truckloads moved completely empty. This finding highlights how FTL shipping often leads to inefficient use of truck space. LTL shipping offers a way to efficiently maximize available truck space, especially when shippers have smaller shipments that won’t fill an entire truck. Freight contract rates, which are constantly fluctuating, also can impact the cost of LTL shipping. A freight contract rate is a fixed price and volume for a set lane and set period of time. Contract rates are long-term, stable pricing for freight rates. The alternative is a spot rate, which is a one-time price offered by a freight service provider. Spot rates are subject to market fluctuations and driven by supply and demand, resulting in daily changes. Choosing between a spot rate or a contract rate will affect the cost of LTL shipping. To know which freight contract rate is best for you, you should evaluate the market, your budget, and your shipping needs.

Advantages of LTL freight shipping

There are many advantages that make LTL freight shipping an attractive option to shippers. Here are 3 advantages to shipping LTL:

Cost savings

Instead of wasting money on partially-filled truckloads, LTL freight shipping combines shipments to fully utilize truck space, while you only pay for exactly what you ship. Despite this cost advantage, there are some higher costs associated with LTL, see the table below for a further breakdown.

Flexibility

Flock’s latest research found that in order to avoid shipping partially empty, over half of TL shippers waited to ship until they filled an entire truckload. With LTL, you can avoid unnecessary delays and ship smaller loads when needed.

Efficient use of resources

Sharing space with other shipments reduces wasted, empty space. Plus, when you can ship smaller loads more frequently, you don’t need to stockpile products, ultimately reducing warehouse costs.

Comparing FTL and LTL shipping costs

There are many factors to consider when choosing between FTL and LTL and some of these factors can affect the cost of the shipping method you choose. One major advantage of LTL is its cheaper shipping rates. Though these cheap rates make LTL seem more cost-effective initially, it can be plagued with surprise fees such as accessorial fees, linear foot-caps, late fees, and damage fees. Here are some questions to ask when determining which shipping method is most cost-effective:

• What is the size and weight of your freight?
• What is your budget?
• What type of freight are you shipping?
• What is your timeline and flexibility?

To further help you make an informed decision, here is a brief comparison table of FTL and LTL shipping costs. LTLFTLRateLowHighDamageHighLowLate FeesHighLowIn 2022, LTL shippers paid an average of $1,511 for each damaged shipment and average on-time-in-full [OTIF] fee per shipment of $477.

Potential drawbacks of LTL freight shipping

While LTL freight shipping may seem like a great way to save on shipping costs, there are still some drawbacks shippers should be aware of.

Longer transit times

LTL shipments typically require multiple stops and transfers before reaching the final destination. Because of this, pickup times occur in a broader window and the estimated delivery date may differ greatly from the actual delivery date. For example, a recent Flock study found that in 2022, 88% of LTL shipments experienced delays of 1-2 days.

Risk of damage

LTL shipping has the highest risk of damage due to excess handling during transloading at terminals. For example, in 2022, 86% of LTL shippers replaced/reshipped damaged freight. For this reason, if you have shipments that are delicate, expensive, or high-risk, LTL may not be cost-effective.

Accessorial fees

LTL shipping is plagued by surprise accessorial fees for freight class, weight, and pickup and drop-off destination codes. LTL carriers strive to be efficient, meaning shippers may additionally be charged for anything that causes a delay or disruption.

An alternate (and better) solution: Shared Truckload

Shared truckload (STL) shipping is a shipping mode that enables several shippers to share trailer space in one multi-stop full truckload. With STL, shipments that are traveling on a similar route move on the same truck. STL freight travels directly from its pickup location to its destination — without passing through hubs or terminals — and isn’t handled during transit. Plus, you don’t have to meet any freight class requirements or a weight minimum. Basically, when you ship STL, you get the advantages of FTL shipping without needing to fill or pay for an entire truck. This means less damage, faster delivery times, no accessorial fees, increased security, and overall cheaper rates. STL is a great option if you have shipments in the 10-44 linear feet range that are too big for LTL but too small to fill a full truckload or want FTL service and benefits without the high rates.

Unlock cost-effective shipping with Flock Freight

No matter what shipping mode you choose, shipping with Flock Freight will maximize your cost savings and advantages of each shipping mode mentioned above. But if you want to cut costs by up to 20% compared to TL, ship 99.8% damage-free, deliver on-time 30% more often than LTL, and slash carbon emissions, shipping STL with Flock Freight is by far the best shipping option.Join the Flock to start requesting quotes and saving on shipping costs.