Truckload or LTL? In these penny-pinching times, it behooves every shipper to consider whether it's more economical to make smaller, more frequent less-than-truckload shipments or to consolidate orders into cheaper, faster truckloads.

The answer depends on so many factors that there's no single rule that applies to all shippers. Everything from the commodity's handling characteristics to the location of distribution centers to time-to-market considerations enters into the final decision.

Because making that decision can be so complex, many shippers rely on sophisticated software, such as transportation management systems (TMS), for help. Such tools can take the guesswork out of the TL vs. LTL decision, yet they shouldn't be the last word, say those in the know. Instead, they say, the smart route is to balance technology with the needs of the customer.

When it comes to cost control, the benefits of combining less-than-truckload shipments into full truckloads seems obvious. Doing so generates cost savings that can range from a low of 5 or 10 percent to a high of 40 to 50 percent, says Gary Whicker, senior vice president of engineering services for truckload carrier J.B. Hunt Transport Services in Lowell, Ark.

Those savings accrue in terms of time—a tandem driver team can make it coast-to-coast in just three days—as well as in packaging, handling, administrative costs, and per-unit freight costs. The cost benefits can be so significant, in fact, that some companies will even look for opportunities to consolidate their loads with those of other shippers to create a truckload.

A case in point: Schneider Logistics Inc. of Green Bay, Wis., found that it could speed deliveries and reduce its customers' costs by commingling their shipments to create truckloads. Schneider takes that approach for General Motors and Ford Motor Company, even though the two are direct competitors, says Vava Speidel, vice president of product development. "If there's a GM dealer half a block away from a Ford dealer, we put the freight on the same truck," he says. "There are terrific savings, but it's hard convincing customers."

Often, what it takes to convince them is technology. More and more shippers are using decision-support tools like transportation management systems to spot opportunities to combine partial loads into full truckloads. "It's too complex for the human mind," says Rick Parker, executive vice president of Nistevo Corp., a logistics network company in Eden Prairie, Minn. "You need a computer. It's just like routing airplanes."

TMS systems do more than simply identify transportation efficiencies. For example, transportation optimizer applications, which are commonly included in TMS packages, can help shippers choose the most economical shipping method. "The optimizer helps you select the right mode, then it helps you build the load," says Parker. "You spend 40 percent more dollars doing it manually."

A TMS system also introduces more flexibility because it allows shippers to continue collecting orders and reconfiguring loads until just prior to departure. A good package, moreover, improves customer-pleasing performance at other points in the supply chain.

"The service demands from the customer are a given," says Randy Garber, a vice president in operations consulting at A.T. Kearney Inc. in Plano, Texas. "To the extent that transportation optimization can help expedite order fulfillment and provide better visibility, there's a customer-service benefit."

Although the opportunities for savings are pushing many shippers toward truckload consolidation, other forces are pulling them in the opposite direction.

"There are a couple of countervailing trends," says Hugh Randall, managing director of transportation consultants Mercer Management Consulting Inc. in Lexington, Mass. For one thing, companies are facing an increase in the number of stock-keeping units (SKUs), which leads to "more fragmentation with smaller shipments moving faster. That argues for LTL," he explains.

For another, the trend toward "lean" manufacturing and minimal inventories forces shippers to make smaller, more frequent deliveries to customers. So even though better information management provides more opportunities for load consolidation, the increasing number of individual products and the pressure for smaller, faster shipments may override those considerations and mandate using LTL, Randall believes.

The current shift away from having one or two national distribution centers and back toward a network of warehouses in regional markets is another reason shippers may choose LTL over cheaper truckload service. Jerry Rau, vice president of operations for the transportation unit of Red Prairie Corp., a TMS vendor in Waukesha, Wis., says he's seeing more and more shippers apply that concept these days.

The re-emergence of regional distribution networks reflects a company's desire to keep inventory close to customers so they can promise delivery in 48 hours or less, explains Ted Scherck, president of the Colography Group, a transportation analysis firm in Atlanta.

"Companies are distributing their inventory to six regional operations instead of one national operation, so the drop in length [of haul] makes it less likely they'll have enough tonnage to fill a truck," Scherck says. Combine that with more specific customer demands, and it's no wonder use of regional LTL is growing—or that some truckload business is moving into regional markets, he adds.

For many shippers, though, the choice between truckload and LTL ultimately hinges on how best to meet their customers' expectations. They don't discount the benefits of technology, but fulfilling those needs clearly takes precedence over efficiency opportunities.

One shipper that tries to balance both considerations is Unisys Corp. of Blue Bell, Pa. Transportation Manager Jeffrey Anderson says the imperative to fulfill customers' demands often means he can't wait for a full truckload to be built. Although conventional wisdom says that he should use LTL in that circumstance, that's not always necessary, he says.

"You don't have to fill a truck to have a truckload," Anderson insists. If a shipment is less than a typical truckload but the trip costs less than it would if shipped via LTL, then why not send a partially-full truck? "If I have four shipments or 4,000 pounds and I put it on a truck, it may cost less than LTL," says Anderson. "I get more efficient movement at truckload prices, even if it's not a full truckload."

Not only does that approach bring about some savings on transportation costs, but it also supports his main objective of getting products to customers more quickly. "We're increasing our [delivery-time] performance by 50 percent," he notes.

Is it better to use LTL for smaller, more frequent shipments or to consolidate orders into fast, economical truckloads? As Anderson's experience shows, it's important to arrive at a solution that meets both the shipper's and the customer's needs.

In fact, there's no clear winner or loser. Industry statistics provide no evidence that shippers are flocking to truckload transportation despite the growing use of TMS. (See chart, at left.) And although those solutions allow companies to achieve significant freight savings through load consolidation, they also can be used to more efficiently route the frequent, small shipments sought by customers.

In short, truckload consolidation can be the right way to go for many shippers, but only if it also serves the customer. That's why it's likely that customer demand rather than technology will shape truck shipping patterns for some time to come.