This article originally appeared in the March/April issue of PARCEL.
For many shippers, the decision to ship freight via Less-Than-Truckload (LTL) versus one of the parcel carriers’ hundredweight programs can be challenging, as there are advantages and disadvantages to both. Many factors come into play in relation to routing each individual shipment. These factors are numerous: transportation cost, transit times, technology for rating and routing, staging area, loading or unloading dock, etc. Let’s compare the advantages and disadvantages of both types of programs side-by-side.
Advantages of Parcel Hundredweight (CWT) Programs
The most obvious advantage to shipping CWT is that there are fewer operational handling requirements such as palletizing, shrink-wrapping, staging, or shipment segregation. In almost all cases, these shipments are handled along the same “line” as the shipper’s normal parcel shipping. On the other hand, moving freight via LTL may be part of more labor-intensive shipping “line.”
In addition, CWT offers an immediate reduction in cost as there are no pallets to buy, and accordingly, the weight of the pallets would not factor into the calculation of your transportation charge.
CWT fuel surcharges are also much lower than LTL. As an example, the February 6, 2017 UPS Freight (LTL) fuel surcharge is 21.4%, compared to only 5.5% for UPS Ground. Many of the common accessorial charges that are applied when shipping via LTL — such as liftgate and inside delivery — are not applicable when shipping CWT.
For shippers with many different commodities, there is the added benefit of not having to determine the class for each package or the entire shipment, as specification of class is not a requirement to ship CWT.
Especially when considering outer zone shipments, minimum charges for CWT are less than those of an LTL carrier, as the charges for the equivalent destination state for the LTL carrier may be much higher the further from origin.
Additionally, volume tendered under these CWT programs contributes to overall parcel incentives.
Advantages of LTL Programs
In most cases, LTL liability limits are much higher than FedEx and UPS CWT programs. As an example, a shipment weighing 350 pounds at freight class 50, one LTL carrier would limit liability to $700.00 ($2.00 per pound), whereas the parcel carriers would limit liability to $100.00 for the same shipment. Each LTL carrier has its own specific liability limits in relation to a loss or damage claim. Therefore, you should review your carrier’s rules tariff.
Over-dimensional packages that can be palletized are often a much better fit in a LTL environment and are not charged any additional handling or large package fees unless over a certain length (typically over 12ft or more in length).
The amount of time each package is handled is greatly reduced when moving through an LTL network. By palletizing and shrink-wrapping the shipment, you will reduce pilferage and the risk of damage to individual packages.
Depending on destination, transit times can also be improved. In looking at a shipment from Houston, Texas to Little Rock, Arkansas, FedEx Ground has a published transit time of two days, while the LTL carrier Averitt Express offers a one-day transit.
Due to the fact that the LTL marketplace offers a competitive landscape — there may be as many as 20-25 carriers and multiple LTL resellers (brokers) that can service any specific lane — shippers are likely to have a significant negotiating advantage that can help lower costs and decrease transit times.
Disadvantages of Parcel Hundredweight (CWT) Programs
One of the greatest challenges of CWT programs is being able to determine the most advantageous cost/transit routing decision. It may require sophisticated software to compare CWT pricing and transit, not only in relation to CWT vs LTL, but also CWT pricing in relation to your current parcel pricing program.
If not familiar with CWT pricing and the different components of how the rates are structured, many shippers may feel at a disadvantage when presented with pricing from the carrier. Like any transportation pricing, many components are open to negotiation. Points of negotiation would include the following: commodity tiers, discounts, deficit weight (e.g., 100 vs 200), minimum package charges, FSC differential, accessorials, etc.
Unless multi-sourcing your regular parcel business, it very likely could mean the shipper only has one avenue for CWT pricing, and less competition is never a good thing.
Disadvantages of LTL Programs
One of the disadvantages of an LTL program is that there is some risk of the entire shipment not arriving on time or being lost in transit, versus one or two boxes of a CWT shipment failing to make delivery on time.
Even though there is less handling of the shipment, there is greater likelihood of damage with LTL providers because the freight is handled via a forklift and is frequently double-stacked in a trailer. The proper use of dunnage, as well as blocking and bracing practices, are imperative to ensure a damage-free delivery.
Finally, LTL volumes don’t automatically contribute to parcel revenue-based incentives. Unless your FedEx Freight or UPS Freight contract specifically states so, the volume (revenue) tendered to the LTL carrier will not contribute to the incentive received from the parcel carriers.
Summary
While there is no clear “winner” in the debate of which mode the shipper should utilize, there are advantages and disadvantages to both modes. Most often, the decision will be based on your specific operational constraints or those of your customer.
Chris Franzen is Executive Vice President of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel & LTL shippers reduce shipping costs 10%-30%. Chris has served over two decades in LTL, Truckload, TMS, and logistics financial services. Chris welcomes questions or comments at chris@shipware.com.
