This article originally appeared in the May/June issue of PARCEL.
Managing shipping costs is a key to any e-commerce business, yet many merchants fail to use the full set of options at their disposal. Most retailers understand that a customer isn’t just buying a teacup; they are buying a delivered teacup. They know to consider the full cost of a shipment when calculating profitability. Most parcel-sized deliveries ship via USPS, UPS, and FedEx. After weighing the options, a merchant might elect to send the teacup via UPS 2nd Day Air. The end result: the customer hopefully receives an unbroken teacup in two business days, delivered directly to their house.
But what happens when a merchant gets an order for 20 boxes of teacups? They could send each box via parcel, but they might have saved almost 50% had they shipped those boxes by freight.
I find that merchants that don’t use freight often forget to look past parcel shipping to consider freight. For shipments too big or expensive for parcel shipping, it’s important to look into “less-than-truckload” (LTL) freight. LTL refers to small freight deliveries that are too large to be classified as parcels and too small to fill an entire truck. Here are some factors to consider when deciding when to use LTL freight:
1)Package Size: Consider LTL if your package’s weight and dimensions are on the edge of USPS, FedEx, and UPS parcel size limits. Parcel size limits top out at between 70-150 pounds and/or 108 inches in length, depending on the carrier.
2)Number of Packages: If there are many packages going to the same destination (for example, 20 boxes of teacups) LTL could also be a cheaper, more efficient solution if the shipment can fit on a pallet.
3)Time to Transit: UPS and FedEx have predictable delivery times via Ground service and require little or no lead time to schedule a pickup. LTL pickups can take a day or two, and transit times are often estimates. If your shipment is time-critical because it is perishable or a customer requires a specific delivery time, a Ground Parcel service may be the best path. If you can be flexible in shipment times, LTL can often save a lot of money.
Overall, if cost is more important than speed, LTL freight can often be less expensive for shipments on the edge of parcel dimension or weight requirements, or a large multi parcel shipment of packages going to the same location.
Navigating the Complexities
Often, merchants are concerned about the complexities of freight, but they needn’t be. Because of the complexity of the LTL/freight marketplace, I usually recommend occasional shippers work with a broker, since that can allow for single point of contact to a wide variety of LTL options. A broker can help a company sift through carriers to find the best fit for their needs.
There are numerous national and regional freight services. Unlike parcel carriers, the cost of shipping and delivery options of LTL freight varies wildly from service to service, with differences in price of 200% or more. Both UPS and FedEx also have huge freight networks but might not be your best option. There are many factors that determine the price of an LTL shipment: accessorial charges, freight class, minimums, distance, base rates, and weight. There are also physical requirements to consider to successfully ship products by LTL. Here are some major considerations to take into account:
1)Accurate Dimensions and Weight: Accurately estimating freight dimensions (length, width, height, and weight) are very important. LTL carriers rely on freight dimensions to allocate the number of individual loads for each truck. The Department of Transportation regulates the weight of trucks on the road, and accurate freight weights allow carriers to manage their truck weights. Inaccurate freight dimensions or weights can result in costly shipment adjustments from the carrier.
2)Location Requirements: Many freight services assume pick-up and delivery locations have loading docks. When making arrangements, find out if loading docks or lift gates are required, as well as if there are other accessorial charges for special accommodations.
3)Freight Class: There are 18 different types of freight class. The lower classes are for dense freight that isn’t easily damaged. Higher freight classes represent lighter, less dense freight that is fragile and difficult to move. Higher classes equal higher rates. Teacups can cost more than books. Perishables needing refrigeration also cost more.
4)Risk Tolerance: Merchants need to determine their freight’s value, their willingness to risk damage or loss, and whether to get insurance directly from the freight company or purchase their own. Are these antique teacups or the dime store variety? Will the customer care if a few teacups arrive broken, or will it be a deal-breaker?
Some e-commerce shipping products are now extending their services beyond parcel to include LTL/freight capabilities. Partnering with a freight broker, these services can provide searchable rate shopping for freight carriers using the many cost criteria. These shipping solutions also offer efficiencies to streamline fulfillment by importing customer orders from multiple carts, marketplaces, and CRM/accounting systems; providing bulk printing labels; and offering ways to easily lookup and track orders.
Merchants can often realize significant cost savings using LTL freight. With a little research and the right tools, you can conquer the unknowns of freight and start saving money!
Rafael Zimberoff is the founder of ShipRush, a Seattle-based software company that specializes in serving small- and medium-sized businesses with shipping solutions. For more information, please visit www.shiprush.com.