30 Jun Effective Ideas To Determine The Best Mode And Reduce Your Shipping Costs (Part 2 of 2)
In the first part of this article series, we talked about the importance of making the right routing decision when it comes to choosing between shipping with a small parcel carrier (like Fed Ex or UPS) or an LTL (Less-Than-Truckload) carrier. To read it – click here.
The main point is that companies need to be aware of, and consider both mode options when routing their small sized shipments. While many small package shipments may fall neatly into one category or another, many of the rules that logistics departments may have used in the past for how a shipment’s mode is chosen are not valid anymore.
The same discussion needs to be had for routing decisions that are on the line between LTL and TL (full Truck Load). Many shipments that would seem to be obviously an LTL or TL shipment may not be so.
The first thing most people consider when deciding between LTL and TL is pallet count – and rightly so. Clearly shipments made up of just a few pallets will almost always be best routed LTL, while a much bigger shipment of 24 pallets is best shipped TL.
A tipping point many shippers use is 12 pallets – any more and a shipment goes TL, with less going LTL. Beware however, there are reasons that this rule of thumb is not always correct.
The ultimate deciding factor needs to be the all in cost of the shipment. Since there are many factors beyond just the number of pallets that go into this cost, each needs to be considered. Here are some reasons why.
For one, the type of product being shipped is important. High value goods – even at lower weights – can cost more on a per pallet basis when you calculate the LTL costs. This is largely due to the liability and potential for damage with these more expensive items.
Also, the product density and weight matter. For example, twelve pallets of feathers will not weigh a lot and the same total weight of some other commodity will likely take up a lot less space on the truck. This is called cube.
All these factors – commodity, density, and weight – are used to calculate a shipment’s class. It is class that is used to help calculate an LTL shipment’s per pound cost which will affect the cost per pallet, and therefore the break even point between TL and LTL.
Another consideration is the destination. Depending on the consignee, there can be extra delivery fees at many locations – like unloading or detention – that are mode specific. This means certain extra costs will only be incurred with choosing one mode or another.
Here’s one more. TL and LTL carriers tend to operate on different fuel surcharge schedules, which as we all know can adjust weekly. When calculating an all in shipping cost it is important to look at current fuel surcharges.
Finally, let’s not overlook service. TL service general means a more direct delivery and less transit time. So, if there is value to getting a shipment delivered faster then that should be factored into the decision as well.
Clearly there are a lot of factors that go into calculating the “all in” cost of a shipment. It’s important those responsible for making routing decisions are not making assumptions about the best mode with out looking at factors beyond just weight and the number of pallets.
If there is one thing logistics professionals take pride in it is doing things efficiently. That means getting the best price for the best service. Making the right decision when it comes to routing decisions can impact a company’s logistics cost.