Many less-than-truckload (LTL) shippers do not fully understand how much they are overspending. With the right tools and guidance, however, they could cut their LTL expenses by 10%-20%.
For instance, many shippers switch from small-package services to LTL at weight breaks that they assume are the most cost-effective for their businesses. But with the right tools in place, they could compare the rates they’re paying for small package vs. LTL, and then determine if they would be better off switching to LTL at a higher breaking point.
Let’s say you’re switching over at 150 lbs. But when you take into consideration the rates, the weight of the pallet, and the minimum charges of LTL vs. the small-package rates, you might find that switching at 500 lbs. will be more cost-effective. That’s why it is important to redefine your small package and LTL weight breaks and structure contracts accordingly. Small-package carriers offer very competitive pricing for shipments in the 150 lb.-500 lb. range.
To have a fully optimized LTL contract, you must look past the general rate increases (GRIs) and closely examine the individual contracts. Because of the various data points to consider, it is easy to overlook areas that are causing shippers to spend too much on LTL. For example, fuel costs, which remain volatile, are not included in GRIs as they are applied separately through one of the many surcharges.
It is not uncommon for shippers to be contracted with 20 or more LTL carriers. This can become difficult to manage, as each new carrier brings more complexity to pricing. Bottom line: The savings and service improvements you can realize from renegotiating your LTL contracts will certainly soften the blow of your carriers’ rate increases.
Raymond Nieuwenhuizen is vice president of marketing and professional services for Andover, MA-based BirdDog Solutions, a parcel optimization solutions company.