More LTL Freight is Shipping Through Consolidation

With new stringent requirements for on-time performance, less-than-truckload (LTL) carriers are increasingly turning to consolidators to manage the last-mile loads out to retailers’ distribution centers (DCs) and fulfillment centers (FCs). 

In the traditional model, LTL carriers pick up freight at a customer location; bring it to a break-bulk and hold it for delivery to a retailer DC or FC. With newly compressed delivery windows, many LTL carriers have realized the improbability of delivering on-time. 

In response, a few carriers have begun shipping to consolidators who ship the freight on pre-arranged trucks that are heading into retailers’ DC and FC locations. With regular ‘sailing schedules,’ consolidators can strive for 100% on-time service with a much higher degree of probability. In addition, the point A to point B direct shipping (instead of the traditional hub & spoke) model reduces costs. …so, more on-time deliveries at lower costs. 

Another side effect: Up until now, LTL carriers have used volume from the largest retailers to generate critical mass that subsidizes freight going to smaller retailers. That’s just not something that some large, growing retailers are willing to tolerate anymore. One recent comment from a growing retailer, “We don’t want our volume that goes to our FCs to help subsidize inbound freight costs for our competitors.”

These are interesting times in retail-related supply chain management.