5 Ways to Optimize Your LTL Freight Shipping Costs
Less-than-truckload (LTL) shipping has opened the door for startups and small to medium-size businesses to get their products to customers. Where parcel shipping isn’t scalable and filling a full truckload might not be feasible, LTL offers the perfect middle ground to ship modest but notable volume—quickly, conveniently, and for a time, cost-effectively. However, as you grow your business and customer base, there will likely come a tipping point when LTL freight shipping costs and delivery times become less comfortable financially and operationally.
Having landed on this article, you might already be seeing the inherent inefficiencies of LTL at scale—or perhaps you’re still in good shape with LTL for now but seeing the early signs that you’ll eventually run into cost concerns. The good news is that there are several ways to optimize your LTL freight shipping spend and streamline your transportation management:
Transparency and accountability are key in maintaining any business relationship, as they allow the parties to collaboratively measure performance. Carrier scorecards are a helpful tool enabling shippers to evaluate freight carriers not only for key performance indicators (KPIs), but also for costs.
A scorecard provides clear, actionable data that can help you identify and address rising costs early on by working with your carrier to make improvements. The scorecard also shines light on factors such as damaged shipments that can quietly increase costs. In the event a carrier simply isn’t working out, the scorecard gives you a documented record of underperformance to go forward confidently with your decision to pursue other options and, as you select a new carrier, communicate to them the issues you had with your previous carrier. Ideally, though, a scorecard is a relationship builder and not a relationship breaker. Learn more about the benefits of carrier scorecarding.
With the freight market constantly fluctuating, carriers expect shippers to seek the lowest rates. Negotiation is inherent to logistics. Not content with your current rates or where they’re trending, but otherwise happy with your carrier and the established relationship? Don’t be afraid to negotiate, and keep in mind that you can also potentially negotiate contract terms to receive more desirable rates over the long haul.
Rate negotiation is one of the first steps in ODW Logistics’ process for reducing freight costs. Before we go to the negotiation table, however, there are a few questions we ask that can uncover transportation cost savings without the need to negotiate rates. If or when negotiation is necessary, those carrier scorecards come in handy to leverage in discussions.
How do your customers feel about your shipping and delivery times? What about the shipping costs that they pay to receive your products? A simple survey can give you a glimpse of the customer’s side, which you can then use to determine how you might be able to realistically reduce costs while maintaining a positive customer experience.
If your customers say your shipping is a little slower than they would like, it’s a sign to be wary when considering ways to reduce LTL costs, because you don’t want to further extend shipping times that are already being perceived negatively. On the other hand, if your customers are happy with shipping time but questioning the cost, you have a clear sign that you need to reduce your shipping costs to reduce theirs.
The tips above can help reduce your LTL shipping costs, but it takes a big change to make a big difference. The best way to reduce LTL costs is with freight consolidation, best defined for logistics purposes as combining freight from multiple shippers to build more efficient full truckloads. By combining your LTL shipments with those from other shippers to assemble full truckload (FTL) shipments, you can achieve greater efficiency and realize significant cost savings with limited downsides. Read our introduction to freight consolidation and see additional freight consolidation benefits and case studies.
For example, SOLUT!, a leading paper food packaging manufacturer, came to ODW in the midst of a large increase in LTL rates over a six-month span with its previous 3PL provider. ODW tapped into its network of 30,000 carriers to negotiate new LTL rates and then consolidate SOLUT!’s freight for immediate, yet sustainable and scalable cost savings. Check out our Solut! case study.
Partner with a 3PL
If evaluating carriers, negotiating rates, surveying customers, and consolidating freight sound like challenging and time-consuming tasks, it’s because they are. Consolidated freight is essentially only available with a 3PL like ODW that works with many different shippers and can group their shipments together in a shared campus warehouse.
With a 3PL, you’re not only getting cost savings, but also a partner who will streamline your transportation at every touchpoint. Learn more about the benefits of outsourcing your transportation management and see how ODW helps its customers save 8–13 percent on freight in the first year of our complete transportation management program.