The LTL Origin Story

January 24, 2020 3:12 am Published by Leave your thoughts

LTL stands for “less than truckload.” It is the most common method of freight shipment ordered from freight companies due to its cost-effective nature. Unless you are running a major retailer in Houston, TX, chances are you will be hiring freight companies to handle your cargo via LTL. Here is an overview of the history of LTL and why it is becoming the most popular shipping option.

A product of deregulation

LTL shipping arose after the trucking industry was deregulated in the 1980s. Before, the freight companies had to file tariff forms well ahead of shipment and face challenges from competitors. This often led to delays, since these complaints required investigation. Meanwhile, cargo was often left unmoved, or a freight company lost money from a competitor. The combination of predatory practices against new companies and price fixing made market entry nearly impossible.

Laws first changed in the 1970s to stop price fixing and collective bidding. Later, with the Federal Motor Carrier Act of 1980, competition increased, and there were fewer barriers to market entry. Also, due to new price controls, carriers could price more competitively. When fuel shortages made keeping large fleets nearly impossible, companies could convert to smaller vehicles and shipments.

This allowed LTL carriers to transport cargo from different customers and set up hubs across the nation. Basically, a full truckload involves one customer using an entire truck from their cargo. This usually leads to bargain pricing, and freight companies are paid less. Once they could load the cargo of several customers on one truck, there was more money paid for several small packages rather than a full truck. This gives customers more options because they no longer have to fill a truck, but it also allows freight companies to make more money.

The future of LTL

As UPS and FedEx started buying smaller freight companies to expand their empires, barriers to entry started to grow in the industry again. You no longer see the influx of new freight companies that occurred when the industry was first deregulated because the heavily branded well-known companies keep stealing the market share.

Also, the freight industry currently faces a driver shortage. However, this will likely fix itself, since LTL shipments can often occur with smaller vehicles. That means that drivers do not require the specialty training of big rigs, and many companies have started performing local deliveries and maintaining van or pickup fleets. These vehicles are cheaper to maintain, and often more fuel efficient as well. Since most LTL shipments are not long distance, this is likely the best way to preserve viability in this industry.

Many customers prefer the personal service of a local company. LTL allows smaller local freight companies to thrive. When you only need pickups and vans to complete deliveries and keep customers happy, that is a more sustainable business model than maintaining fleets of 18-wheelers and relying on long-haul truck driving.

Pro Delivery LLC in Houston, TX took advantage of the start of LTL to offer you quick and reliable delivery. If you require trucking services, call us today to get a free estimate.

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