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How to Save Significant Money on Your LTL Freight Spend

Negotiating great discounts with LTL companies may be hard if your annual freight spend does not meet or exceed a certain amount. And likely you have a handful of LTL companies that you work with whether they are regionally-based or have a better track record for getting product into certain areas. Now that you spread your shipping volume across more than one LTL carrier, you reduce the leverage even further for negotiating.

How is it possible to save more money on your LTL freight costs? There are great alternatives that your company can take advantage of without sacrificing control over which carriers you use and without contractual commitments. Read more...

Companies that ship LTL typically have their preferred carriers to move goods and in some cases their customers may dictate which carrier is used and want the freight charges billed directly to their account number. Having a good mix of carriers is a must but can also have an adverse effect when it comes to negotiating the best discount. Carriers want volume and if your volume is spread over multiple carriers it will reduce your negotiating power.

There are alternatives that your company can take advantage of in order to save money on freight. One of the best ways is to use a broker or 3PL (third party logistics) company. Brokers match shippers with carriers and find the lowest rate to move specific shipments. 3PL companies are technically brokers because they are required to have a broker’s license but what differentiates them is they offer other value-added services such as invoicing, auditing, inventory control, warehousing, and outsourced logistics.

Whether you choose to just deal with a broker or a 3PL depends on your needs. With a surge in the number of brokers and 3PLs available, it may be overwhelming to choose the right one. Start by analyzing your needs and putting together a list of objectives and goals which will help navigate the selection process. Many brokers and 3PLs have web sites or software for you to use to rate and book your shipments. In some cases, they may have a partnership with a multi-carrier shipping software solution that makes it easy to process LTL shipments alongside small parcel and even rate shop all the available options.

If your company’s LTL freight spend is less than 2 million per year, you can benefit by using a company that leverages discounts with carriers based on an aggregate spend for a large group of customers. The way this process works is rather than paying the carrier directly, the carrier will bill the broker or 3PL the freight charges. You in turn pay the broker or 3PL. Consolidating the freight volume of multiple companies gives the broker or 3PL more negotiating power and deeper discounts with the carriers – something your company could not do on its own. Often using a broker or 3PL can have added benefits because if there are any issues with the shipment, they will handle disputes and claims on your behalf.

How significant are the savings?

If your company has a 1 million per year freight spend then you likely are averaging 15-20 percent savings off of list rates with carriers. Using a broker or 3PL can save your company 25 percent or more. Over a year just a 5 percent savings adds up to $50,000. It is up to you whether you choose to pocket the savings or pass the savings along to your customers.

Many LTL carriers have adopted technology to make it easier for brokers and 3PLs to interact with them – from providing real-time rates to booking shipments to scheduling pickups. And you don’t have to worry about giving up your favorite carriers. Often you can keep using your preferred carriers for select shipments and then use the broker or 3PL for everything else. You don’t even have to worry about contractual obligations. Most reputable brokers and 3PLs will gladly accept your business and either charge a per transaction fee per shipment (i.e. $15.00) or make their cut by taking a portion of the discount they have negotiated with the carrier. Any way you look at it, you are saving money on freight that you would not have been able to negotiate on your own.