As the graph on the overall for-hire indicated, full truckload is the largest for-hire mode by market share at 46.4%. Whether it be dry van or refrigerated, shippers will experience quicker transits of their freight from origin to destination under this transportation mode versus the other 53' capacity option, intermodal.
Freight is typically configured and stretch-wrapped on pallets, then loaded into the trailer for transport. Shippers can also floor load or use slip sheets to load out the cargo trailer. Floor loading and slip sheeting a trailer increases the total usable cubic foot capacity for a trailer because it allows more product to be loaded because of the reduction in pallets space and weight of those pallets. Conversely, slip sheeting and floor loading increases the time for loading and unloading the product.
When selecting a freight providers, shippers can access a diverse set of options for truckload shipping (dry, temperature-controlled or Haz-Mat capacity) through a variety of the top freight brokers and logistics providers, although technology has really allowed freight brokers of all sizes to access the same capacity and price so it gets down to what is the best fit for the company.
Shippers can also access the truckload directly, but there is a limit to the total number of motor carriers they can manage independently.
Freight brokers or logistics service providers (LSP) are more efficient at tapping into the total market through their technology and staff that can be leveraged cost-effectively across a larger base of customers and revenues they have through their non-asset business model.
Not only is there a speed factor of finding the capacity through a non-asset provider, but also in their ability to quickly vet the carrier for safety and legal operating authority, along with putting the carrier under contract. All important factors to ensure the load is on the road legally.
When shippers have freight shipments that are not large enough to fill the full capacity of a 53’ trailers they turn to LTL or less-than-truckload. Under this freight mode of shipping, the motor carrier aims to consolidate several LTL shipments from multiple shippers into one 53’ trailer by sweeping local and regional distribution centers that are then brought back to its transload cross-dock to load out the line hauls for the destination cities. Once at the destination cities, the loads are then transloaded at another cross-dock location to then be sent out on local deliveries.
There is more to the LTL model, which is what the industry calls a hub-and-spoke network operation, but this summary should be enough to get you started.
Larger shippers can do their own consolidations by using a transportation management software (TMS) platform that optimizes its freight routes and rates to develop the most efficient and cost-effective load plan for the day’s shipments.
Freight consolidation is a logistics freight strategy where a shipper combines multiple LTL shipments within a particular geographic region into a truckload or intermodal that is then line hauled to a destination point where the shipments are broken down and shipped LTL to their final destination. Utilizing an LTL freight consolidation program brings with it many benefits that will be touched upon later in this guide.
Another freight service mode option is expedited. There are some industries that live on expedited freight, such as medical and JIT operations. This freight mode is the more expensive option for shippers, so our recommendation is to do all that is possible to limit expedited use which can include planning ahead, more communication and get teams involved to help them understand the cost implications this mode has on its budgets.
With the introduction of the two primary modes of freight transportation used within the US behind us, let us further unpack the topics of cost, comparison and other topics associated with how shippers utilize the various OTR (over-the-road) options to optimize their logistics and supply chains.
Truckload v. Less-than-Truckload (LTL)
As touched upon before, no freight mode is arbitrarily better than the other. Diversification is the only free lunch in logistics, so it is important to consider every freight mode and mix of modes to develop the best logistics strategy that meets a shipper’s requirements.
Assembling the best load plan for the day is essential in developing the most efficient and cost-effective method for a shipper to move its freight. The optimization process is best accomplished through a transportation management system (TMS) where a shipper’s freight is optimized on both rate contracts and mode that will meet the required pick-up and delivery schedules.
Modal conversion is where the biggest savings is derived in freight savings optimization. The purpose of making the transition between freight methods changed the way shippers move freight efficiently. One of Intek’s biggest strengths is helping shippers in modal conversion from truckload to intermodal shipments. By leveraging the versatility of truckload, alongside the efficiency of rail transportation, modal conversion from truckload and intermodal is simply put, access to long-term savings, amongst several other benefits.
What we would call the “pyramid of modal conversion” is listed below where the mode on the top is always being evaluated by TMS systems to consolidate into a mode below:
- Small Parcel
- LTL (less-than-truckload)
In both truckload and LTL, it is impossible to deny the impact that “big data analysis” has had in transforming the freight cost savings. The area where the greatest big data cost reductions come through the freight modes of LTL to truckload and from truckload to intermodal.
Modal conversion from truckload to intermodal has tremendous savings opportunities for shippers that can work with an additional transit associated with intermodal.
LTL cost savings through big data optimization can be attributed to the data analysis process capabilities of Transportation Management Systems (TMS). Big data also provides companies with the ability to analyze their full logistics and supply chain network for freight savings and KPI improvements.
Big data combined with the capabilities of a TMS brings several benefits to a shipper’s LTL and truckload freight and logistics network:
Increasing Efficiency in the “Final Mile Delivery”
The final mile delivery of any mode is the most inefficient and therefore costly. The connectivity in today’s TMS systems improve the capabilities of shippers and logistics service providers ability to drive out those inefficiencies. Simply put, knowledge is power, and the knowledge collected through big data is a powerful tool in the shipping analysis process, from origin to final destination.
Reliability Through Transparency
The improvements in a logistics and supply chain brought together in the mountains of data the modern TMS can quickly summarize make the most complex simple. The operators behind the screens can then see the transparency in the data to make better decisions to ensure the best cost and service is part of the equation every moment of the day.
By automating away what is operating well in the logistics network, the TMS gives a “bird’s eye view” of the exceptions that need attention to meet the RAD date, required arrival date. The elimination of the noise puts a laser focus on the issues that drive up costs while driving down performance and through the transparency comes the reliability.
Transportation Management Systems (TMS) play a large role in the success of route optimization for all freight modes, but in particular, in the performance of LTL and truckload shipments as these freight modes are typically the largest share of moves within a company’s supply chain.
By utilizing a TMS and the data it collects, carriers can allocate resources in a more efficient manner. Once the freight is in motion the TMS will continue to provide the feedback to keep the freight on its course for on-time delivery. Putting too many resources, such as moving several LTL on the same O/D pairing on the same day versus consolidating them all into one truckload is increasing the cost of the freight lane and not capitalizing on efficiencies available within the day’s load plan.