Last week we kicked off our five-part series on how shippers can save on LTL shipping. In the series we’ll be examining five factors:
In this installment, we look at carrier selection.
Carrier Selection for LTL Shipping
In a recent article in Inbound Logistics magazine, carriers and 3PLs like Logistics Planning Systems discuss several techniques and tactics shippers can save on less than truckload (LTL) shipments.
LTL shipments usually range between 150 and 20,000 pounds and add up to $35 billion nationally. According to Inbound Logistics, “All but about $3 billion of that revenue runs through the top 25 LTL carriers, starting at the top with FedEx Freight and ending with LME.”
Every carrier has its strengths and specialties. Again, some are national, while others are more regional or local in their service coverage. Some carriers specialize in expensive next-day delivery, while others offer slower, but cheaper service. The key is to find carriers that ideally align with your needs.
Build Great, Long-Lasting Relationships With Carriers
Like all things in business, great relationships with suppliers, vendors, and strategic partners are instrumental to successful ventures. And that fact is particularly true for your relationships with carriers. The act of choosing the ideal core of carriers to serve your needs can seem daunting given the sheer numbers of companies, which range from local mom and pop’s with three trucks and two drivers to large national carriers with thousands of assets.
The first ground rule in selecting and establishing long-term supplier relationships with carriers is to make the arrangements win-win. Carriers need to make a profit, too, so your needs will have to match up with their coverage areas and specialties. Moreover, you’ll want to get this right the first time. Changing carriers, like changing any supplier, is an enormous, expensive hassle that can easily distract you from managing your business. If your needs match up well with the offerings of the carrier, that’s the beginning of a symbiotic relationship.
Choose the Right Group of Carriers for LTL Shipping
Here are five guidelines for selecting the perfect mix of carriers that can help you save on LTL shipping over the long haul.
- Carrier Coverage: Do your loads go nationwide or just to a few nearby states and cities? Don’t choose a carrier that exceeds your needs because you could be paying for unnecessary services. In other words, don’t buy an SUV if you’re only hauling one or two people to work each day.
- Carrier Specialties: Many carriers specialize in narrow areas of service, such as flatbeds or dry vans or delivery services. For instance, most LTLs don’t deliver to homes, therefore if you choose an LTL for a residential delivery that doesn’t perform them you could get charged a premium. On the other hand, if you pick a carrier that’s set up to deliver to homes, fees will be more reasonable.
- Carrier Network Imbalances: When carriers have a so-called headhaul lane its trailers are running full, which means costs are high due to little supply. But on the return trip or backhaul, the carrier may be looking to fill out its trailer, and rates are thus lower.
- Carrier Delivery Speed: Make sure you match your shipper’s “must have” delivery date with the least expensive transportation option possible. In other words, don’t pay for expedited service if the load can arrive in two to three days.
- Hire a 3PL: Many companies hire a 3PL to manage all its carrier relationships. That’s because companies like LPS have partnerships and contractual arrangements with hundreds of carriers. These existing relationships also mean discounted and preferential pricing through volume discounts. LPS, for instance, can offer its customers an average of 10–40 percent through volume-based discounts. Shippers can also receive accessorial discounts with LPS by leveraging fuel surcharge discounts.
Stay with this series when we next examine consolidation.