The LTL Process: How Money is Made and Lost

Three Best Practices for Maximizing Revenue and Managing Costs

At the end of the day, it all comes down to finances. How well has your LTL company managed costs? How well have you capitalized on new opportunities in a changing market? These questions define success and failure in the logistics industry.

In the second of four new SMC3 LTL Hybrid Sessions, Christopher Adkins, VP of Yield Strategy and Management at ArcBest, shares what he sees as the most important best practices for keeping your LTL business on the right track. Whether you’re an LTL veteran or a newcomer to the industry, these evergreen tips are key to maximizing revenue and minimizing unexpected costs.

1. Know your freight

If you’re just getting started in the LTL space, Adkins suggests tracking down a more seasoned industry veteran and having a long conversation about your needs. This type of guidance will yield important intel on the factors that impact pricing.

You may be thinking, “Wait, don’t I just need to know how much it weighs?” The answer is no. As Adkins points out, pricing has become much more multifaceted and often hinges on several factors beyond weight. Shippers need to be able to answer several questions about the properties of their freight:

• Fragility –– How likely is it to break?
• Stowability –– Can it easily comingle with other freight or is it oddly shaped?
• Value –– Is it something a bad actor might be interested in stealing?
• Hazardousness –– Are there any special precautions that go into transporting it safely?

Achieving clarity on the above metrics will help avoid miscommunications between shippers and carriers, and as you’ll see in the next section, these miscommunications can have costly and wide-ranging consequences.

2. Build strong relationships

Speaking on best practices for shippers, Adkins stresses the importance of getting off on the right foot with your carrier partners.

“Years ago, carriers defined the rules and shippers followed them,” he said. “That’s still somewhat the case, but there’s a bit more push and pull now.” A big part of that change has been the emergence of LTL brokers, who remove some of the friction and encourage both sides of the equation to be flexible.

So, how can you build strong relationships with carriers? Adkins advises a full transparency approach.

“Sometimes, shippers assume that withholding information from carriers and only sharing the essentials will get them a better price. In reality, the opposite is usually true: Not being transparent winds up costing more. If the carrier is estimating in the dark, they’re going to default to pricing things on the higher end of the spectrum just to be safe. On the other hand, having all the details ironed out at the beginning allows them to think strategically and avoid costly surprises down the road.”

While it might be tempting to take a short-term view and maneuver for a low price on one shipment, the truth is that a strong carrier relationship will be infinitely more valuable in the long run.

These relationships unlock new levels of efficiency and problem-solving. For example, say you’re a shipper who needs to move some freight that isn’t attractive to carriers because of its odd dimensions, fragility, etc. Working closely with a carrier can yield suggestions for making the task more manageable––say by bundling several objects together in order to accomplish the same job with fewer loads. Sometimes, these solutions mean that the carrier takes home less money, but the newfound efficiencies and superior shipping outcomes make up for this because strong relationships are important to carriers as well.

Here’s the bottom line, according to Adkins: Both shippers and carriers want the other to be successful at the end of the day, because mutual success translates into long-term, dependable revenue. Being transparent, honest and communicative with your logistics partners supports relationship-building that will save you money down the line.

3. Pay attention to industry trends

Labor continues to be a hot-button issue in logistics, as it is in every industry right now. The past several years have brought many disruptive changes to the labor market––not the least of which is a growing impatience among drivers with the long hours and unorthodox schedules that have historically defined the job.

“Gone are the days when haulers are more or less content with being away for a month at a time,” said Adkins. “Like many of us, they want to be home.”

This comes as a changing industry is giving drivers more options: amazon warehouses and other staging facilities offer opportunities to forklift operators and home delivery is an alternative for drivers.

In order to stay competitive as an employer, LTL companies need to be proactive in their approach to recruiting and retaining employees. This may mean rethinking schedules, improving benefits or optimizing routes based on new labor constraints.

Another trend LTL leaders need to keep in their crosshairs is technology. As Adkins points out, the industry has become much more digital.

“It used to be the case that everyone was analyzing freight profiles by just looking at a few pictures. Now, it’s boiled down to a lot of really detailed data regarding dimensions, weight, type of object, etc.”

LTL leaders are well advised to stay on top of the NMFTA shipping standards and find a logistics technology partner that keeps their operations compliant and cost efficient. As consumer expectations around package tracking and visibility continue to develop, this technology will also support better customer experiences.