What Is Less-Than-Truckload (LTL)?
Less-than-truckload, also known as or less-than-load (LTL), is a shipping service for relatively small loads or quantities of freight. Less-than-truckload services are offered by many large, national parcel services as well as by specialized logistics providers.
These services can accommodate the shipping needs of countless businesses that need to move smaller batches of goods frequently. Less-than-truckload shippers offer economies of scale so that freight costs of individual shipments are minimized.
The Basics of Less-Than-Truckload (LTL)
Often, a company will not wait until a wholesaler is running low on product inventory to ship a full truckload of replenished goods. Instead, it will more frequently ship less-than-truckload to mitigate the risk of the potential loss of sales from lack of inventory for its distant customers. The shipping costs of its goods may be incrementally higher, and the delivery time may be longer than for a dedicated full truckload, but the trade-off is more dependable inventory availability.
Firms providing less-than-truckload services can range from specialized services that target a particular audience—say, a business that serves urban markets throughout a certain region—to large, national truck transportation companies that carry a client company's goods across the country.
Either way, the LTL provider combines the loads and shipping requirements of several different companies on their trucks—a process called assembly service—making it more cost-effective than hiring an entire truck for one small load. Less-than-truckload shipping requires a high degree of coordination and sophisticated logistics planning for maximum profitability. Information technology systems are a critical part of the mission, for both shippers and customers.
How Less-Than-Truckload (LTL) Works
Specifics of a less-than-truckload shipment depends on a number of different variables: the shipment place of origin, the destination, the packaging type, the number of pieces, the weight, and whether there is any need for special handling. Shipment size is also important. Trucks vary in capacity—a 16-foot truck usually holds about 800 cubic feet, a 26-footer can hold up to 1,400 cubic feet—so truckloads do too.
Many carriers have their own rules and limits for the dimensions of LTL freight. Generally, though, LTL refers to individual shipments of between 150 and 15,000 pounds. (Loads under 150 pounds are handled by parcel service carriers like FedEx Ground, UPS, or the U.S. mail.) They occupy less than 24 feet of a truck's trailer and consist of no more than six pallets. LTL shipments are transported on these flat stands, made of plastic or wood, that measure usually 48” x 40”. For the most efficient use of space, as well as security, individual packages in an LTL load are often shrink-wrapped together to create one big box.
Along with the shared trailer space, less than truckload shipping operates via a hub and spoke model. Local terminals act as the spokes that all connect to the main hubs or distribution centers. Trucks load freight at local terminals and transport it to the hubs, where the goods are delivered directly to their destinations or put onto other trucks to continue onto the recipient.
The National Motor Freight Traffic Association (NMFTA), a non-profit membership trade group, represents interstate, intrastate, and international motor carriers that specialize in LTL, setting industry standards in commodity packaging, pricing, and transport.
Less-Than-Truckload and the E-Commerce Era
Less-than-truckload services have gained increased importance in today's economy. With the inexorable rise of e-commerce, quick shipments of products to customers are imperative for online businesses competing for sales—not only with each other but with brick-and-mortar retailers. This means that their products must be inventoried in warehouses or distribution centers close to customers at all times, but also that they can be delivered with due dispatch.
Pros and Cons of Less-Than-Truckload (LTL)
The benefits of LTL mainly boil down to costs. LTL allows several different loads headed to the same vicinity to be combined to fill a truck or container, thereby creating economies of scale. Each shipper pays for just the space they use. Furthermore, the NMFTA does regulate and standardize rates, whereas regular trucking pricing is completely dependent on the market.
The main consideration of LTL is time. It takes longer to plan, to organize, and to prepare goods for shipping, and of course, the shipment may take longer to arrive since the truck has to be filled before it leaves, and may not take a direct route to a particular destination. Depending on how many stops or transfers there are, LTL may involve more handling of goods, increasing the chance of their being damaged or lost.
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