LTL Freight Consolidation, Can it Work for You?
Posted by Rob Snowdale on Tue, May 19, 2009 @ 08:36 AM
Negotiate, negotiate, negotiate, that's the mantra in today's freight shipping environment. True, it's currently a buyers market and most LTL carriers are willing to entertain a rate reduction in this, the worst freight recession most carriers have seen in a very long time. The effort to achieve discount freight rates with qualified LTL carriers who can meet or exceed service requirements is a balancing act that's been going on since deregulation. Unfortunately, many small to medium size companies and the personnel they charge with managing their freight spend have become one-trick ponies when it comes to exploring alternate means to achieve discount LTL freight rates for their domestic LTL distribution costs.
LTL carriers can only negotiate to a point. Having seen so many LTL carriers exit the market place with little or no warning, we all need to hope that those remaining LTL carriers will have sufficiently understood their internal operating costs to refrain from pricing themselves into extinction.
So you have completed your bid process and negotiated the LTL trucking carriers to their rock bottom freight rate, what's next? Some companies have seen a savings from putting a couple of 15,000 lb shipments together on a truckload carrier who will deliver both shipments en route. This methodology can be a great cost saver but for most companies who have a decent volume of LTL shipments it is underutilized and only the obvious opportunities, those that jump of the page, get looked at for freight consolidation.
LTL freight consolidation done right requires technology to master the countervailing intricacies of geography, due dates, trailer utilization, and the intersecting price points of LTL carrier rates and truckload carrier rates. Other factors such as driver hours of service availability, loading and unloading time and due dates need to be factored into a complex algorithm that ultimately produces good load planning that saves money and delivers on time. Effective freight consolidation can't be done on a piece of paper or by looking at a map.
We recently completed a project for a client shipping frozen product on pallets from Distribution Centers located in FL, OH and AZ. The client shipped 75% of their product as LTL and the balance shipped as full truckload, or where they could piece together a few larger shipments, as truckload with stop offs. We implemented our LTL freight consolidation or load optimization software for the client receiving multiple uploads daily from their order entry system. All orders carried a due date. In a matter of minutes the software calculated trip miles, driver hours, unloading times, trailer space utilization, LTL costs vs. truckload and stop off costs and a number of other parameters. The load planning provided by this software consolidated costly refrigerated LTL shipments into considerably less costly multiple stop truckloads that preserved the integrity of the due dates. After implementing this software the client's improved mode utilization mix sees them shipping 27% direct LTL, 5% full truckload and 68% truckload with stop offs. The average savings through load planning and LTL freight consolidation vs. direct LTL was 38%.
You won't find another 38% coming from further negotiations with LTL freight carriers. How much of your LTL carrier freight spend might lend itself to this application?
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