Optimizing Freight Logistics: Balancing Speed, Cost, and Reliability in LTL Shipping
In This Article
- Competing Priorities in LTL Shipping. Speed, cost, and reliability concerns pull in separate directions.
- Industry-Specific Considerations. Industries like retail, manufacturing and e-commerce have unique concerns.
- Risks of Poorly Balanced Logistics. Failing to strike the right balance between speed, cost, and reliability creates risk.
- Trade-Offs in Freight Logistics. Find a balance between speed, cost, and reliability that works for your business.
- Four Strategies for LTL Freight Optimization. Technology, data, your carrier, and packaging techniques all play a role.
- Tools for Real-World Optimization. Meet current expectations and establish competitive advantages for the future.
The intricate operations of LTL shipping demand a delicate balancing act between three critical factors—speed, cost, and reliability. Achieving this balance is no simple task.
Freight optimization – the process of aligning Less-Than Truckload (LTL) operations with your business needs – includes prioritizing these three factors. For shippers, the challenge lies in deciding which factors to prioritize so that operations remain efficient and keep customer satisfaction high.
Imagine building a house. You can use premium materials (good) and finish quickly (fast), but it’ll cost more. Or you can finish quickly with budget supplies (fast and cheap), but the house will be of low quality. Do you want quality and affordability? Expect delays. The balance lies in choosing wisely based on your priorities.
No matter what type of freight you ship, this guide offers actionable insights to optimize LTL logistics, focusing on overcoming the challenges of balancing these three factors, understanding the trade-offs of choosing one factor over another, and resources for implementing freight optimization strategy.
Challenges in Balancing Speed, Cost, and Reliability
Competing Priorities in LTL Shipping
Anyone managing LTL logistics knows that speed, cost, and reliability often pull in competing directions.
- Speed: Shippers with time-sensitive shipments may choose to regularly use expedited services. This enhances their customer satisfaction by ensuring materials or goods are delivered on time.
- Cost: Optimizing for cost management is common in industries that do not have time-sensitive shipments.
Industry-Specific Considerations
The priority assigned to speed, cost, and reliability isn’t uniform across all industries. Each sector has unique requirements based on customer demand and operational challenges.
Consider the following examples:
Retail: Retail businesses frequently require faster shipments to meet customer delivery expectations and keep shelves stocked, especially during peak shopping seasons like holidays or major sales events. Timely deliveries are essential to avoid lost sales or frustrating the retail customer. The shipping manager might require premium shipping services or overnight routes to prioritize speed, driving up operational expenses.
Manufacturing: In manufacturing, the priority often shifts to reliability and cost control. Delays in receiving shipments of raw materials or components can disrupt production schedules causing downtime and bottlenecks in the supply chain. Ensuring steady and predictable deliveries is crucial to maintaining production efficiency. If your finished product is a component for your customer, then your timely shipment is critical to prevent their downtime. That cascades along the entire supply chain until the product is received by the end user.
E-Commerce: In the competitive world of e-commerce, speed is a key factor for gaining and retaining customers, as consumers and distributors increasingly expect same-day or next-day deliveries. However, balancing delivery speed with cost efficiency is essential to protect profit margins while meeting consumer demands.
Risks of Poorly Balanced Logistics
Failing to strike the right balance between speed, cost, and reliability leads to significant risks. Among these are escalated shipping costs, increased delays, and dissatisfied customers.
While prioritizing expedited, fast shipping methods ensure goods arrive when needed, it is frequently more expensive. Investing in speedy deliveries might diminish profit margins.
Prioritizing a carrier with lower up-front costs might risk reliability, leading to missed deadlines or damaged cargo, or risk damaging your relationship with your customer if deliveries fail to meet expectations. Additionally, some customers, such as major retailers, will charge a fine if shipments are not received on time, in full which ultimately may result in a larger cost.
Trade-Offs in Freight Logistics
Prioritizing Speed Over Cost
When businesses prioritize speed, the advantages are clear: shippers ensure customers receive their goods on time, often exceeding expectations. Industries like healthcare, pharmaceuticals or e-commerce need these options since delayed deliveries can result in serious repercussions for their businesses and customer relationships.
However, fast shipping options, such as expedited delivery or premium services, increase costs, and these expenses may not always translate into tangible returns.
Businesses must evaluate whether the premium price tag aligns with the value delivered to their end consumer.
Cost vs. Reliability
Cost-cutting measures in freight logistics, such as consolidating shipments or choosing economy carriers, can initially reduce your freight bill. However, a hyper-focus on cost reduction often brings unintended consequences such as:
- Late shipments, incorrect deliveries, or higher incidences of damaged goods, which directly impact customer trust and operational efficiency.
- A shipper’s total cost of transportation needs to be considered – the price you see on your invoice may not be the full cost you pay. These additional costs may include the retailer fines mentioned above, the cost to remanufacture and ship the product, and the hassle in dealing with an upset customer and managing the claims process with the carrier.
Finding A Middle Ground
The ultimate goal is to find a balance between speed, cost, and reliability that works for your business. Take, for instance, a regional food distributor that utilized route optimization tools to save on costs while maintaining timely and reliable deliveries. By strategically planning routes and consolidating shipments, they struck an ideal balance that satisfied both their budget constraints and customer expectations.
Customer Spotlight: Prioritizing Speed and Reliability
- A CPG manufacturer that makes cold drinks across the U.S. started delivering to a new grocery customer.
- Their carrier was consistently missing delivery times and shipments were constantly late. As a result, their customer scorecard was damaged, and their grocery customer was ready to remove their products altogether.
- Then, they reached out to their local Solutions Specialist. Old Dominion’s sales team worked with the manufacturer to set up MABD shipments, resulting in a 100% score on their customer scorecard and every shipment arriving on time.
- By collaborating with OD and examining their product metrics, the CPG team was able to find a solution that met their top shipping priorities - speed and reliability.
4 Strategies for Freight Optimization in LTL Shipping
1. Leveraging Technology for Shipping Efficiency
Today, shippers can use the latest technology to optimize their freight operations with more precision than ever before. The LTL shipping industry is experiencing a significant transformation, driven by advancements in machine learning (ML), data analytics and Application Programming Interfaces (APIs). By integrating these tools, companies can better manage inventory, predict demand, and streamline operations.
Companies can now use Artificial Intelligence (AI) and ML technologies to process market demand signals in real-time for precise, adaptable forecasting.
For example:
- Retailers can combine forecasts with same-store sales data to quickly adapt to consumer needs. This can help lower inventory management costs and, when integrated with manufacturers’ systems, can automatically reorder product to prevent lost sales or consumer dissatisfaction.
- Manufacturers and distributors can use AI and ML to optimize production workflows, predict maintenance, and maintain quality standards.
API connections and eBOLs (Electronic Bills of Lading) deliver greater efficiency and reliability.
- APIs enable carriers, 3PLs, and shippers to pass data between their individual software applications. For example, a shipper may submit a pickup request directly to a carrier’s system, instead of calling or using a website account. This improves communication and streamlines critical tasks such as invoicing, compliance tracking, and shipment updates.
- eBOLs replace outdated paper-based processes with a cleaner, more secure way to manage shipping documentation.
Shippers who invest in these tools – predictive analytics, seamless API integrations, or optimizing routes with AI-powered insights – can better meet customer demands and thrive in a dynamic, fast-paced shipping environment.
2. Data-Driven Planning
Shippers of any size can benefit from tracking and analyzing their shipment data. This critical business practice allows companies to make data-driven decisions that maximize efficiency, improve service quality, and reduce their overall cost of transportation.
Tools such as OD’s Freight Value Calculator allow shippers to examine specific metrics such as average sales value per shipment, carrier shipping charge, on-time shipment percentage, and claims ratio.
This tool quantifies costs associated with freight shipping and reveals potential areas for cost reduction. It demonstrates that the initial estimate that you receive from a carrier may not be the actual cost of shipping when factoring delays, lost sales, or products damaged in shipping.
For example, examining your carrier’s on-time shipment percentage can tell you about the efficiency and reliability of your current provider. If the on-time percentage is low, it could signal a need for change.
In addition, claims ratio is an indicator of service reliability. A low ratio suggests fewer issues with lost or damaged goods and, therefore, fewer additional fees on top of your up-front shipping price.
Examining shipment data empowers shippers to make informed, strategic decisions about their shipments, cut unnecessary costs, and boost efficiency. Analyzing this data allows shippers to minimize or eliminate potential fines and calculate the impact of carrier performance on total transportation costs. What emerges is a clear picture of the areas where shippers can achieve significant savings.
3. Building Strategic Partnerships with Carriers
Selecting carriers that align with your company's priorities is crucial. Collaborating with the right carrier is crucial for aligning logistics operations with business goals.
Your choice of freight company can have a significant fiscal impact on your business that goes far beyond the initial rate. Consider areas like claims, negative brand reputation, the cost of customer acquisition, and customer satisfaction. Lower priced options don’t always provide the level of service demanded by today’s tightening supply chains.
To ensure your carrier partnership is meeting your strategic needs, consider the following:
- Trustworthiness: Look for a carrier with a proven track record, solid reputation, and positive customer and industry reviews.
- Flexibility: In an industry where change is constant and unavoidable, the carrier’s ability to adapt to changes and provide flexible service offerings is essential to consider.
- Technology Investment: In this digital age, having a carrier that uses advanced technology for tracking, data integration, and communication is critical. This can enhance your own efficiency.
- Financial stability: Ensure the carrier you partner with has sound financial stability. You want a partner who is investing in their business to ensure additional capacity as your business grows, uses the newest equipment to ensure reliable performance, and that trains their people to treat your freight as if it is their own.
A successful partnership is always a two-way street. Both shipper and carrier need to communicate effectively, work collaboratively, and adapt to changes to reap the full benefits of cooperation.
For more tips on choosing the right carrier to partner with, consider asking your carrier these five essential questions to make sure you are choosing the right freight shipping option for your business.
4. Optimize Freight Density and Packaging
As well as choosing the right technology, examining shipment data and building a strategic partnership with your carrier, shippers focused on optimizing cost and reliability should invest time in proper packaging and maximizing freight density.
- Proper Packaging: Focusing on good packaging techniques reduces the risk of fragile or high-value shipments being damaged or additional fees caused by re-orders and claims. Shippers who invest time and energy in packaging properly reap the most benefits. Get started with these actionable tips.
- Maximizing Freight Density: Standardizing packaging sizes, consolidating shipments and stacking items efficiently on the pallet while following weight distribution guidelines makes unloading and loading easier and may reduce cost. Regularly review product dimensions and methods of unitization to ensure LTL loads remain intact.
By adopting these practices, shippers optimizing for cost or reliability can reduce claims and chargebacks and meet their business goals.
Tools for Real-World LTL Optimization
Efficient freight management revolves around optimizing for cost, speed, and reliability to ensure shipments are timely, accurate, and secure. By understanding key factors like freight density, NMFC classes, transit time, carrier capabilities, and proper packaging, shippers can streamline operations, minimize expenses, and enhance overall delivery performance.
Optimize for cost with accurate freight density and NMFC Classes
When optimizing for cost, accurately applying freight density and National Motor Freight Classification (NMFC) classes is essential for accurate freight estimates.
Passing on the accurate weight and dimensions to your carrier is critical to receiving an accurate freight estimate. Freight density is calculated using the total weight and exact dimensions (length, width, and height) of a shipment. Giving your carrier the correct density minimizes variations in freight costs and protects you from unexpected or unforeseen charges.
The NMFC is the LTL industry standard maintained by the National Motor Freight Traffic Association (NMFTA). It publishes freight classes for all commodities shipped based on a shipment's characteristics such as density, handling, stowability and liability. Understanding your commodity’s accurate freight class is imperative as it is one of the central factors influencing your estimated freight costs.
Strategies for determining correct density include:
- Checking weighing tools for accuracy and scheduling routine calibrations for scales.
- Investing in dimensioners to get accurate dimensions
- Ensuring your BOLs have the correct NMFC item numbers by purchasing access to NMFTA’s ClassIT system, the online version of the NMFC.
Most LTL carriers will reweigh shipments as they move through the network for load planning, and invoice the shipment based on the total weight measured.
By understanding and accurately applying freight density and NMFC classes and providing accurate dimensions to the carrier, shippers can prevent unexpected discrepancies between the freight estimate and the final invoice, leading to significant savings of time, money, and frustration.
Optimize for speed using transit time guides and carrier communication
When shippers are optimizing for speed with increasingly tighter delivery windows, ensure you are matched up with a carrier that has the capacity, transit times, and response times that support your freight needs.
Tools like a transit time guide can help set customer delivery date expectations or understand what is possible for an urgent shipment.
Customers with urgent needs should also consider an LTL carrier with a well-established expedited service offering. For example, if freight needs to go from Boston to Los Angeles in one to three days, OD can manage a freight leveraging air or hotshot carrier, simplifying the shipping process.
In addition, technologies such as APIs can give you more transparency into carrier capabilities and capacity planning.
Optimize for reliability by investing in proper packaging
Better packaging corresponds with more reliable LTL operations. Instead of dealing with the damage caused by poorly packaged shipments, taking the time to properly package freight can save time and money.
- Include an extra layer of protection like fiberboard (cardboard) around the shipment to minimize the chance of damage.
- Use plenty of shrink wrap. One layer often falls short. Make sure shrink wrap starts at the floor, winds around the pallet, and has several layers to firmly secure freight.
- Ensure freight stays within the boundaries of your pallets. Freight that overhangs the pallet deck is vulnerable to punctures and crushing and does not provide sufficient support. Investing in sturdy pallets may seem expensive in the short term, but it pays off in the long run by reducing the risk of damage.
- Use rigid interior packaging materials to fill in spaces, provide protection from shock and vibration, and to help prevent crushed boxes. This way, shipments will be stronger and more prepared for the rigors of LTL transportation.
Investing wisely in smart packaging upfront not only ensures that your shipments reach their destination intact but also gives you assurance knowing that you have done your best to prevent any issues that could potentially arise.
Why Balancing Speed, Cost, and Reliability Matters for Freight Optimization
Achieving the perfect balance within freight logistics has wide-reaching benefits. Businesses benefit from reduced costs, seamless delivery timelines, satisfied customers, and enhanced operational efficiency. Beyond these metrics, an optimized system is inherently more efficient, reducing unnecessary costs.
By prioritizing LTL freight optimization, businesses set themselves on a path to long-term success. Not only can they meet current expectations, but they also establish competitive advantages that help prepare for the future. Balancing speed, cost, and reliability in LTL shipping might seem complex, but it is achievable with the right tools, strategies, and freight carrier partner.