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What Is LTL and What Does Economics Have To Do with It?

 

LTL freight stands for less than truckload freight shipping.  LTL freight is about the same as FTL, full truckload freight shipping but the main difference is that LTL freight companies ship smaller loads.  Generally LTL freight is a shipment that weighs less than about 10,000 pounds but the LTL freight will weigh more than the 100 pounds that many parcel carriers max out at.  Another difference between LTL freight and FTL freight is that, in LTL freight, many shipments are transported in one truck. 

FTL freight, also, usually only goes from point A to point B where LTL freight carriers usually act like a parcel shipping company in that LTL freight carriers travels a route and picks up many pieces at once and then the LTL freight shipment is unloaded at a hub or terminal to be separated and sorted into their various destination sites.  Therefore, LTL freight shipping is usually cheaper than FTL freight shipping, but LTL freight shipping is somewhat more costly than parcel shipping. Usually, after the LTL freight is separated and sorted, the items off of an LTL freight truck will either be taken by other LTL freight trucks or by the bigger FTL trucks to specific destinations across the country.  LTL freight, then, is more closely related to parcel services. 

Congress began regulating various transportation services, including LTL freight shipping, in 1887 when it passed the Interstate Commerce Act, which directly affected LTL freight carriers.  Then the ICC was created to regulate the transportation of all goods through LTL freight and FTL freight trucking services.  This Act made the shipping industry, including LTL freight, strictly regulated until the late 1970’s when the ICC’s regulatory stranglehold became less and less to attempt to garner competition within the shipping industries, which includes LTL freight carriers.  Deregulatory changes, which included fuel, began in 1980.  Then, in 1995, the ICC was eliminated.  In late summer of 2010, the US government will deregulate fuel prices more which will end up driving LTL freight and FTL freight rates to go up.

The advantages of LTL freight shipping is that, most times, LTL freight shipping offers more accessorial services than FTL freight shipping.  LTL freight shipping acts like parcel shipping in that the LTL freight carriers will also deliver to or pick up items from residential (non-commercial) areas.  LTL freight carriers will usually offer notification services prior to LTL freight delivery.  These extra services that LTL freight carriers offer are usually billed by a predetermined flat rate fee or the LTL freight carrier will use a weight-based surcharge. 

Many LTL freight companies don’t just rely on trucking services.  LTL freight carriers also work with airlines and railroads to make shipping with LTL freight more cost efficient.  Quite a few consumers like the idea because there is less handling of the LTL freight, which reduces damage, loss of the LTL freight as well as increasing security of the shipment and because it will be shipped quickly.  A majority of LTL freight carriers use tandem trailers because the LTL freight has already been sorted for their specific destinations and then the LTL freight can be easily dropped at the designated terminal or hub.

Because of the current recession economy within the United States, many consumers have gone to LTL freight shipment companies for their shipping needs.  The recession has produced a downturn in purchasing; therefore, there is less of a need for any sort of shipping company, including LTL freight carriers.  It should be noted though that LTL freight shipping costs and profits were more stable in 2009 than FTL shipping.  Less demand equals smaller needs. 

The current LTL freight market is about $30 million, but currently there is a major amount of overcapacity of LTL freight companies, which is the capacity of the LTL freight companies to produce so much of a product that it cannot sell it.  This means that there are too many LTL freight trucks and not enough products to fill the LTL freight trucks to ship.  This has had dire consequences on the general economy because if there are too many LTL freight trucks, LTL freight companies will lay off or fire their employees. 

Then, when the recession is over and shipping demands pick up again, the LTL freight companies will not be ready.  LTL freight carrier’s overcapacity, combined with the current recession, has invariably led to more LTL freight companies to go out of business, which ends up in LTL freight carrier job losses as well.  Another trend, that has sprung up in the past few years, is that LTL freight tonnage, which is what both LTL freight and FTL freight carriers relies on for their revenue, has been reduced significantly because goods are being produced for LTL freight shipping that are lighter and smaller than ever before. 

Both LTL freight and FTL freight carriers spent the better part of 2009 slashing rates on their shipping costs to attempt to keep or garner business.  Just like the housing market, there seems to be no end in sight for the LTL freight carrier’s woes but the economy will invariably show signs of an upswing when the shipping industry, LTL freight carriers included, begins to grow again.

 
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