LTL vs Parcel – How Manufacturers Determine Which is Best
There was a time when shipping was determined simply by the size of the package. If it was above 150 pounds, a manufacturer would send via LTL carriers and if it was under that threshold, parcel was the preferred method. However, as technology and customer-demand have changed, manufacturers these days are forced to pick the right supply chain solution that addresses multiple variables from customer demand, budgets, special handling and more. And to be completely honest, some of these factors are classic examples of overthinking what is actually a rather simple decision.
To simplify things, we’ve compiled this easy to navigate list of general rules for manufacture-related shipping standards. Whether you are a large production facility or produce special, one-off products for custom order fulfillment, refer to this easy guide to determine which method – LTL or parcel is best suited for your business.
1. Consider Your Customer
Any successful business understands that the fundamental mission of operation is to provide exceptional service to their consumer base. With a manufacturer, their customer can vary from distributors, wholesalers, retailer, or the end consumer. Each customer has unique needs, a different price-point, and levels of profit margin. Shipping their products to them is also just as diverse. Some customers need their products quickly to meet their consumer’s expectations, while other customers are OK with slower, more economic solutions. It’s due to the diversity of a consumer base, that smart manufacturers always consider the needs of each customer as their primary attribute when determining whether to ship parcel or LTL.
2. Determine the Dimensions
As we indicated initially, choosing between parcel and LTL used to be 100% driven by the size, weight, and shape of the commodity being shipped. If it was more than 150 pounds, was considered bulky or oddly shaped, it would be sent via the LTL platform. However, nowadays, more parcel carriers are beginning to offer express delivery shipments for larger packages. Companies like FedEx and UPS have express divisions that can ship products as heavy as 500 pounds in the same containers as a smaller box – and with similar commitment times. However, there is a premium price to be paid for this type of service. So – to simplify things, consider this general rule of thumb – if your shipment is on a pallet, is more than 150-pounds, or does not require delivery within 7 business days, LTL is likely your best option.
3. Consider Volume
Sol Price who was the founder of Price Club was fond of saying that volume cures all. While his statement was in reference to bulk-product sales, this mentality holds true with manufacturers as well. If you are fortunate enough to have customers that order products frequently and in large volume, sometimes expedited delivery is worth the cost. Some manufacturers believe the opposite – if they have consistent customers, they find the cheapest way to send products as in most cases, their profit margin for each product is lower due to reduced volume rates. This mentality can and often does backfire over time, especially since modern customers demand items quick, efficient, and in good condition.
On the flipside, the quantity of your shipments may also determine the need for parcel or LTL shipping. Since your customers will likely pay for shipping, working with them to determine what method works best for their needs and budget. You’ll be surprised how easy choosing between LTL and Parcel will be – simply by asking the customer.
Finally, Determine Reliability Factors
As a manufacturer, you understand that if freight is damaged on the way to your customer, the expense is likely yours. While most LTL and parcel carriers offer freight protection and insurance, in most instances, you won’t see that money for quite some time. This can lead to delays in production, reduced profit margins, and in some cases, lost customers. It’s due to these facts that arguably the most important determining factor should be the reliability of your LTL or parcel shipping partner.
Manufacturers should review a few important details about the reliability of their providers – but most importantly realize that there are some carriers who are simply better than others – in both LTL and parcel shipping. One resource that manufacturers can rely on is an experienced 3PL. A third-party logistics provider maintains solid relationships with multiple parcel and LTL carriers across the globe. They know the ins-and-outs of shipping solutions that manufacturers have to deal with on a daily basis, and in many cases – can handle the logistics tasks on behalf of manufacturers.