How the parcelization of LTL is shaping up

A white tractor with LTL trailers on the highway

The less-than-truckload industry is using technology more than ever to solve for inefficiencies around shipment pricing, tendering and invoicing. While the evolution continues for a historically manually run subset of trucking, the space still has a long way to go before LTL shipping can be considered an automated process.

There are many nuances from load to load and carrier to carrier in the LTL industry.

Pricing the freight is subject to an antiquated classification and coding system, which often misses the mark and requires re-ratings and revisions to determine the appropriate price for the space occupied. Some carriers also charge by the pallet, linear foot or hundredweight.

Further, accessorial charges for limited access, residential delivery, by-appointment or anything requiring a liftgate adds another layer of variability. Shipment tendering can be done by phone, website, TMS, electronic data interchanges or application programming interfaces. Many of those same methods are used for invoicing. The problem is there is a lack of uniformity across the group.

“All of these different methods keep the industry in a manual state on many levels because there are very few industrywide standard protocols, integration models and data flows,” Curtis Garrett, chief strategy officer at Reconex, formerly Recon Logistics, told FreightWaves. Reconex provides shippers with expertise and tools to navigate the complexities of LTL shipping.

“The combination of all of the little differences and variables in each LTL program between carriers, shippers and 3PLs mean that in total there are millions of individual LTL program frameworks in existence. That’s too many — too complex,” Garrett continued. 

He said cross-participant councils and communities have been reworking best practices and pulling the industry’s evolution forward, but much work remains to be done to codify the process. He noted some of the void has also been filled by industry vendors like Shiplify, which provides real-time location data to help carriers accurately project accessorial charges to customers.

Another step forward for the industry came last week when Old Dominion (NASDAQ: ODFL) announced it is offering an all-in rate option to shippers prior to pickup. The pilot will reward shippers capable of digitally interfacing with the carrier through better pricing.

“The characteristics of the shipment, operational requirements, service expectations and price should all be as locked in when possible and well before the freight is picked up — with only a few exceptions and small room for variance,” Garrett said. Digitizing the tendering process and using electronic bills of lading via API connectivity is the future as it improves the flow of data between carriers and shippers.

He said standardization of the process among the carriers is what’s needed but cautioned it may be difficult to do as the more than $50 billion industry is dominated by a few large players, which have spent decades building out their own idiosyncratic systems.

“The LTL framework that all shippers, carriers play within needs to be built, connected and adhered to — almost like an LTL ‘chain’ or protocol,” Garrett said. “Space-driven pricing needs to be the center of LTL costs. Accurate dimensions and weights need to be the norm for shippers to provide.”

However, he said “collaboration, community and trust among the key participants” will be required, but he thinks once the standard is set, “the rest will fall in line.”

“In essence, LTL needs to get to the place where we’ve closed all of the visibility gaps, aligned the invoice with the quote, terminated the empty miles and unused capacity, broken down the silos and built more standards with more collaboration and trust,” Garrett said.

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