The major categories or modes of US transportation are OTR (Over-The-Road), Rail, Intermodal, Ocean, Air, and Specialized (bulk, tankers, couriers, etc.). The common subcategories of OTR are Parcel/Small Package, LTL (Less-Than-Truckload), TL (Truckload), Dedicated/Private Fleets, and Expedited TL. To understand LTL, I will provide a high-level comparison of just the first three OTR subcategories. For this comparison, “Parcel” typically delivers smaller package sizes whereas both LTL and TL both deliver “handling unit” sizes (pallets, totes, etc.). These handling units may contain multiple, smaller packages.
Most of us are familiar with parcel, because we receive package size deliveries from Amazon and other e-commerce retailers to our homes when we order online. DHL, FedEx, UPS, and USPS are the common freight carriers that provide this service to our house’s doorstep. Many people are familiar with TL size shipments which are just that, a standard, full “truckload” which use a straight-truck or tractor-trailer to pick up from a single location and deliver to another single location.
The question remains, what is LTL? You guessed it, LTL involves shipment sizes that are larger than Parcel but smaller than TL, delivering to multiple locations and customers. The shipper (or configurations within the shipper’s software) should determine if it is more cost effective to ship a partially full truckload vs LTL. Here are a couple of examples of when LTL is the preferred mode.
LTL transportation is based on a hub and spoke model. The hubs are the LTL cross-dock facilities. Multiple hubs are located within the area the LTL carrier services; local, regional, super-regional, or national. Each hub has spokes that define the daily, multi-stop routes for the local drivers. The place where the spoke meets the outside wheel is the final delivery/consignee/end destination and/or pickup/origin location. Lastly, there are LTL drivers who perform the longer routes (many are single drivers with overnight stays or team drivers) to pick up and deliver between the LTL cross-dock hubs.
This means there are pallets for multiple customers on the same trailer/truck.
How is the LTL industry governed? The LTL community established the non-profit National Motor Freight Traffic Association (NMFTA) in 1956 which publishes and maintains the National Motor Freight Classification® (NMFC) or code. LTL carriers (581 currently) are required to belong to this association. Each commodity has its own NMFC code. These codes are grouped into NMFC freight classes based on four specific “load type” criteria: Density, Stow-ability, Ease of Handling and Liability / Risk. There are 18 different freight classes ranging from 50 to 500. Generally, a lower class means a lower shipping cost because your item is easier to ship. A class density example is a pallet of reams of paper (higher density) would be a class 60 versus a pallet of ping pong ball boxes (lower density) would be class 500. Accurately profiling the commodities you ship and assigning the NMFC is critical to transportation cost and risk mitigation.
The charge for this LTL service is not as straight-forward as standard TL pricing which is based on a rate per mile between the origin/pick-up and destination/delivery locations plus the US Gov fuel. An LTL customer is paying only for the space their product occupies on the LTL trailer/truck. Traditional LTL rates take into account weight, distance (origin to the destination), freight class codes, plus the US Gov fuel.
As you can imagine, TMS functionality and rating for the LTL mode is different than for the Parcel and TL modes. When you start to think of a TMS system, recognize that each transportation mode has its operational and pricing idiosyncrasies. Depending on the mode(s) you use will dictate what type of TMS software(s) best fits your needs.
Stay tuned for more blogs that continue to explore the transportation industry and systems.
—Jess Kittrell, St. Onge Company