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7 Areas to Look at in Order to Save on LTL Freight Shipping

ltl freight shipping costs

We continue our look at all of the facets that go into (less-than-truckload) LTL freight shipping by covering the areas you can look to as a way to combat rising LTL freight costs. As you know, each year, LTL carriers typically announce an increase in their rates, and they have for many consecutive years. But you are not forced to just take those rates and say, “I guess it just costs more!” There are things you can do to mitigate your LTL freight costs (even beyond just the rate!). If you haven’t been keeping up with our LTL freight series by checking out “What is LTL Shipping?”, the benefits of shipping via less than truckload freight, the 10 factors that make up a LTL freight rate, and then the factors that go into determining LTL freight class.

We will conclude our series on Monday by expanding more on the use of technology and freight management services to even further still decrease resources needed to manage LTL freight shipping costs.

7 Areas to Look at in Order to Save on LTL Freight Shipping

Many shippers of freight are overspending on LTL freight shipping by not fully understanding how to save on LTL freight costs. In some cases, this overspending totals tens of thousands to hundreds of thousands of dollars each year. Understanding some of the following ways to

1. Education is KEY: Understand the Factors that Go into a LTL Freight Shipping Rate

In our factors that go into LTL freight shipping rates blog post earlier in this series, we provided 10 factors that go into generating LTL freight rates. The more you understand these factors, the more likely you are to get the most accurate freight rate possible at time of shipping, so there are no surprises on the back end causing further time (and time is MONEY) spent on dealing with your LTL freight shipments. Some of these factors are accurately knowing weight, distance, density, desired time of shipping, and choosing the right insurance. But, usually, the most overlooked, but most important aspect is choosing the right freight class. If you end up selecting the wrong classes consistently because you are no, such as class 50, you could be leaving money on the table by actually picking a class that creates a higher rate.

2. Think about using multiple modes of shipping

Sometimes you may have a shipment that you think would be great for LTL freight shipping. You’ve been shipping LTL mostly and feel very confident processing, managing, and understanding the LTL world, so you always try and choose that shipping mode. However, if your freight is oversized or near 20,000 pounds, or perhaps nearing around 5 or more pallets, you may consider a volume move and get a spot quote by the carrier’s rate department or through your third party logistics provider services. Additionally, you may want to look at Truckload rates and see if you can find a better rate through multiple TL carriers.

3. Outbound LTL Freight Shipping Accounting Options: Prepaid vs. Prepaid and Add in Outbound

Let’s first talk about outbound LTL shipping. You may ship freight to small and medium sized companies and you come to agreement with your customer that you will sell your product on a freight prepaid and add basis. After all, you ship a lot of goods and probably have better freight rates than your customer. You select the carrier, you dispatch the carrier and you pay the carrier. Then you invoice the customer for your product and for the freight charges.

A surprising number of companies decide to mark up the cost of the freight charges and make an additional profit in this way. On the other hand, some companies pass on the freight charges with no markup.

Those that decide to mark up the freight cost have thought it through. They feel that it’s their overall shipping volumes (volumes that their customer does not have) and their hard work in making sure they have ('the most competitive freight rates') possible that allow them to mark up the freight. They feel their internal costs of picking the product, packaging, calling the carrier, loading the freight and the carrying costs of paying the freight invoice prior to the customer reimbursing the freight cost should be compensated in some way.  This is often known as turning your LTL freight shipping into a profit center on the outbound side. This is a direct hard cost savings benefit for your shipping department.

Those that decide to pass on the freight cost without markup (a.k.a “prepaid”) feel that their competitive freight rates allow them to compete with vendors who may be closer to the customer and if they mark up the freight costs this might not allow them to make the sale in the first place. Many think the practice of marking up freight costs is just not good business practice.

4. Inbound LTL Freight Shipping Accounting Options: Prepaid and Add vs. Collect

One of the simplest and easiest ways to immediately cut your inbound LTL freight shipping costs is to change your shipping terms from “prepaid and add” to “collect.” Having your vendor or supplier ship collect on your recommended carrier eliminates any handling charges, thus saving you money.

When you gain more control over your inbound shipping, you can save on freight shipments coming into your business every day. As the buyer and receiver of the goods, you can (and should) designate the carrier and arrange for shipping charges to be billed directly to you at your discounted rate. This is called routing shipments inbound "Collect." Collect is a billing option, in which you are invoiced by the carrier. It does not mean paying the driver at the time of delivery.

Shipping inbound collect also reduces the number of carriers from different suppliers arriving at your receiving dock every day. When you control the routings, you control how many trucks deliver to your door. That also makes it easier to maximize your staff’s efforts.

5. Think “Long Term” LTL Freight Shipping costs to TRULY Save

ltl freight shippingWe understand we all must take a look at the costs in front of us right now to better manage our freight spends. But, you have to understand the outcomes from the choices in choosing the least cost LTL freight carrier for each shipment. You must consider other factors when it comes to choosing which LTL freight carrier is really offering more attractive “long term” LTL freight costs. So, what is a “long term” LTL freight shipping cost? You must consider the following before you always choose the least cost carrier to make the best decision:

  • Does the LTL carrier provide the right amount of liability insurance for your specific freight shipment? This could end up being a big headache down the road when freight damage occurs and you go through the process of getting your freight claim paid to cover the cost of your damaged freight.
  • Is the LTL carrier reliable in getting your freight to your customer in time? We all know the hard reality of losing a customer because you aren’t getting your freight to them on time.
  • Do you have a system or program that helps you grade your LTL freight carriers performance over time? Relationships are very important, don’t get us wrong, but don’t keep choosing a LTL freight carrier because their rep gives you tickets to games or concerts. Make sure you keep your LTL freight carriers honest and have some way, either through your TMS or some records keeping, and have regular reviews of their performance in order to make sure the LTL carriers you are choosing are truly the best ones. Then you must make sure your transportation dispatchers/managers are staying in line with the best LTL carriers. You can avoid your people choosing the wrong one, by taking the LTL carrier out of your TMS system if you are using one.

6. Use a Transportation Management System for LTL Freight Shipping

Another way you can save on LTL freight shipping costs is to employ freight technology, such as a transportation management system, freight claims software, and accounting software. Make sure all of these systems can speak to each other through web services or integration so they work seamlessly together and don’t create more resources required to manage them. When you use technology such as a transportation management system you can:

  • Eliminate manual process
  • Have multiple carriers to choose from at your fingertips
  • Ability to analyze data and shipment activity to arm you with more knowledge
  • Track and manage employees and activity
  • Decrease time in training new hires
  • Easily deploy through web-based applications, meaning no costs to install or keep up the system

The idea of using a TMS as a tool to empower you with processing LTL freight shipment aids in decreasing the resources needed and the time in which you spend trying to arrange and finalize a LTL freight shipment.

7. Use a Third Party Logistics Provider to Aid in Managing LTL Freight Shipping

If you are a small shipper, saving money on shipping is crucial to your business. Thanks to the internet, consumers are able to compare price between competitors in a matter of seconds. Because of the recession, consumers are price-driven and will purchase the item with one of your competitors for a minimum savings.

One way to be able to be more competitive is to lower your shipping cost. How do you do this? I hate to break it to you, but it’s a catch 22. In order to get big discounts with LTL carriers is to have volume, but you can’t get the volume because your shipping rates are too high. Now, let’s level the playing field. Working with a third party logistics provider can offer you tremendous savings since generally their LTL freight spend is in the millions. For years, food distributors have been forming co-ops, by combining the freight spend of several hundred companies, into one. Think of a third party logistics company as a co-op.

Beyond just the volume, a third party logistics provider can help you with many things such as providing a transportation management system, help with freight accounting, and freight management services such as claims, carrier relationship management, and more!

You are not forced to have to deal with ever rising LTL freight costs. You have control. Make sure you use the above ways to save on LTL freight costs and truly take control of your freight spend. What OTHER LTL freight shipping savings tips do you have to offer? Let us know in the comments section below!

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Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
  • Rod Trocke

    Unless I missed it you forgot to compare the base rates between carriers, specifically on the various classes used to ship and receive your product. Carrier base rates have not been the same for some time. Also while a carrier might take a 5% increase on average they may increase class 50 rates 8% and other classes 2% and decrease other classes to arrive at the average. Third party help isn’t all that much lower as I have seen better pricing in place before they took over also I have not observed one case where the third party had not taken at least one rate increase a year.

    • Cerasis

      Rod, do you mean comparing each carrier against each other? That is a good place to look. We talked about that in our 10 factors that make up an LTL rate. Now, as far as third party. Often, a third party can help small to midsize shippers on rates, due to volume and experience in negotiating. However, the greatest advantage of a 3PL is not on price alone. When you look at a 3PL on price alone, you are commoditizing the service provider. What you want to see is if the 3PL is adding value to help with other aspects around freight management (Accounting, claims, decreasing claims, giving you visibility and better management). Also, the expertise in creating a custom program that truly does look at EVERY possible way to save on hard costs. But you must consider the soft and hard costs of what a 3PL can provide to see the overall savings. Thank you for your comment!

      • Rod Trocke

        Yes. Third Party, I have never seen where a 3P came in and the overall cost has been reduced. That really doesn’t matter any more as it appears more and more companies are just paying the transportation billings. I would guess that is because top management doesn’t understand the issues, and they are unable to obtain a knowledgeable person. I don’t see that changing till it effects there bottom line.

        • Cerasis

          Rod, we are sorry to hear you have not experienced bottom line savings yourself from a 3PL. However, again, I think you must look beyond simply the RATE or COST of transportation directly. You must look at all of the other factors that make up the transportation/freight budgets to look at Total Cost. Total costs include resources needed, any errors created due to manual entry or inefficient process, how much time you take working on claims (and what you lose by not having as much experience as a 3PL to do it on your behalf), what it costs to lose a customer with inefficient freight management, and the inability to have visibility to where your freight is using technology to easily inform your customer where their freight is at any stage. Finally, a robust 3PL will offer a TMS and services which will drive continual improvement as you scale. Rates are not the MAIN driver for the use of a 3PL, although, we have seen many times our negotiation skills and years of expertise, and attention to carrier relations, has yielded our clients’ rates they may not have been able to get without us, just mainly due to our wide network. For example, we can work with a shipper and get pricing PER LANE, and manage that and offer up those rates seamlessly in our TMS with accuracy. When you are able to use the data derived from using the TMS, each year we can easily evaluate your shipping patterns and continue to get a rate that is more and more advantageous to each unique shipper.

          • Rod Trocke

            There is no save on a cost. If a logistic person is doing the job correctly they are already doing what 3rd party companies do. Granted you can compare all sort of so called services and add in a price to indicate a savings, using numbers. The bottom line is who knows the information that facility has to obtain a suitable cost then one who works there versus one in an office 20 or 100 miles away?

          • Cerasis

            Absolutely, Rod. If an in house person is able to do it with great expertise and realizes savings, then that is great. However, there are many out there that are too strapped for time and cannot keep up with all of what it takes to run an effective problem. That is where we come in and help. Our goal is to make the logistics person look like a superstar to their boss!

          • Rod Trocke

            If they are too strapped for time, where do they find the time to deal with a 3P?

          • Cerasis

            If you are spending time having to manage the 3PL, our guess is that you don’t have the right one. A 3PL should not take up your time to have to manage the 3PL. The 3PL should be able to come in, take the load of process and weeds off your plate, and do it with expertise you should expect. That will then free up the logistics/transportation manager to work better with suppliers and customers, giving valuable face time needed to stay at a strategic level. If a 3PL relationship is a lot of work, one should not do it. However, in our business model, our goal is to make it as easy as possible through our expertise. Additionally, if we feel we will not help a customer better than they are today, we are very good at saying, “We are not a great fit for you, you don’t have enough pain/issues for us to bring value to you.” We always suggest that a shipper ask themselves “What could I be doing to grow my department and scale by not adding more resources? How can I improve my process to eliminate waste? How can I save bottom line money better?” It’s a relationship when you employ a 3PL, and if the 3PL is not guiding you and making that relationship work long term, and it’s only seen as a commodity/cost model, then it doesn’t make sense. However, if you can see the longterm value, then a 3PL is perfect for you.

            But, as you said, if someone is an expert in house and is navigating it well then if they foresee as they grow the ability to continue to do it on their own, that is awesome. We encourage it even. But not all are lucky to have the expertise to do it effectively and keep more money towards the bottom line, or as they grow, it’s more expensive to hire more people than to use a 3PL.

          • Dave Hill

            Hello Steve: You bring up Excellent points…We have customers thousands of miles away, that we have never met in person, we save them considerable time and frustration in our management of their Transportation Functions. What a well run 3PL can offer customers goes so much further than “just a low price.” I have even been so bold as to suggest to customers (shoppers) that if all they are interested in is cheap prices…we very well may not be the best fit for them, as we all know, poor service at a cheap price….remains poor service. Thank you for confirming what our small company has made a cornerstone of our service. Best Regards Dave Hill

          • Cerasis

            Is it easy to take that stance in the beginning or when you hear “Objections” from potential paying customers? No. It’s not always easy. But for the long term, is it worth it both for US and the Customer. YOU betcha. Dave, thanks for giving this industry a better name by being a good guy and having a GOOD company! Kudos to you and all that view the 3PL Shipper relationship as a longterm partnership built on sustainable ROI!

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