Caleb Gardner was an intern with DAT's Product Management Team and is student at Oregon State University. Below is some of what he found in his research on LTL freight.
I recently had the opportunity to look at LTL (Less than truckload or partial truckload) shipments in DAT’s rate and load databases. I think what I learned could help you increase your revenue and help you price LTL freight.
On an average week, about 6% of the loads posted on DAT are LTL shipments. Most truckers on the load board prefer to carry full truckloads, so only 7% of truckers post their trucks as available to carry LTL. For these truckers, the national LTL-to-truck ratio is about 2.2 loads per truck per week. This shows that LTL shipments are available.
Since LTL shipments pay less than truckload, how could they increase a truckload carrier’s revenue per mile? Although LTL shipments pay less, they're significantly lighter and take up a smaller percentage of a truck’s volume and weight capacity. Because of that – plus the work in smaller pick-ups along with consolidated LTL freight in the competitive trucking market – LTL shipments pay 2 to 6 times more than truckload freight on a per-pound and per-cubic-foot basis.
HOW DO YOU PRICE LTL LOADS?
Just as full truckload prices vary from lane to lane, so do LTL shipment prices. During my analysis I found that the LTL shipment prices could be shown as a percentage of the going truckload price when grouped into specific weight bands. On average, I found that:
- Shipments less than 1,000 lbs generally pay about 15% of a truckload while taking well under 5% of a trailer’s total space.
- Shipments between 1,000 and 5,000 lbs generally pay about 30% of a truckload while taking less than 5% of a trailer’s space.
- Heavier shipments – greater than 5,000 lbs – generally pay about 60% of a full truckload and max out at about 30% of a trailer’s total space.
You can take the average spot market rates you see in DAT load boards or the broker-to-carrier rates in DAT RateView and multiply that by the percentages above. That can work as a starting price for LTL freight when talking to brokers. If you are pricing directly for a shipper customer, those broker-to-carrier rates are still useful, but you'll want to add in a margin since you are doing the sales effort. The experts tell me that the margin on LTL freight is typically higher than truckload, so adding around 20% should keep your rate competitive for shipper customers.
A truckload carrier has at least three opportunities to use LTLs when they appear on the load board or from a customer:
1. Couple an LTL or partial load on the trailer with a truckload that doesn’t weigh out and doesn’t fill the full space of the truck. For example: If you have a truckload that weighs 40,000 lbs and takes up 2,000 cubic feet of space, then adding an LTL load (going to the same destination) that is 3,000 lbs and takes up 150 cubic feet of space would increase your revenue per mile significantly.
2. Consolidate two or more partials into a full or nearly full truckload. Consolidation offers potentially high returns and a rate that's higher than the standard truckload rate. Just keep in mind that LTL freight can be a lot more labor intensive than truckload. Consolidating several small shipments and loading them in the order in which they need to be delivered can be tricky.
3. Get a partial in a situation where you might otherwise deadhead. Maybe there is an LTL available, but there just isn’t a full truckload. Other times, the lower weight and easier loading/unloading of an LTL could make it work where a full truckload wouldn’t make sense. Besides, receiving a percentage of a truckload price is better than nothing!
Next time you are on the load board, keep an eye out for LTL shipments. Finding the perfect LTL load might make your trip that much more productive. Tell us in the comments section if your efforts with LTL freight improved your revenue or if you have tried LTL and it didn’t work out.
Categories: Freight Rates