[ODFL] Old Dominion and less-than-truckload

Let’s say a parts supplier needs to get a full trailer of parts from its facility in Boston, MA to an OEM manufacturing plant in Los Angeles, CA. One way to do this would be to hire a full truckload (FTL or just TL) carrier, most of them owner-operators with 1 to 5 trucks in their fleets. A shipper can’t be expected to manage one-to-one relationships with thousands of carriers, whose capacity can vary by route and day, so they often rely on truckload brokers to source supply. This aggregation layer is also highly fragmented, with 17k brokers intermediating 20% of $400bn US truckload revenue, though I imagine volumes will consolidate around larger players like Uber Freight, XPO (XPO Connect), JB Hunt, and CH Robinson, who have the means to automate matches through sophisticated routing technology. Uber is repurposing the machine learning and routing analytics from their core cab business to freight transport. A few guys working out of garage with a few phones and a spreadsheet of contacts can’t compete with that.

FTL carriage isn’t the only way for our parts suppliers to get things from here to there over the road. In serving a just-in-time OEM that needs parts delivered at higher frequency in smaller batch sizes, a supplier might split cargo into 3 separate shipments, none large enough to occupy an entire 53-foot trailer, in which case they turn to a less-than-truckload (LTL) carrier that combines their freight with that of other shippers to fill up a trailer. What happens is the LTL employs pickup-and-delivery (P&D) drivers based at a local service center (aka, ”terminal”) in Boston and assigns each of them a dedicated territory (Cambridge, South Boston, etc.). Those drivers will drop off pallets¹ in the morning, pick up pallets throughout the day, and deliver their collections to the Boston service center in the evening. At the service center, dock workers combine our supplier’s pallet with pallets from other customers, loading the mixed, heterogeneous freight on trailers at one of the hundred or so loading-bay doors. A line haul driver takes this truckload to an intermediate hub in, say, Chicago, where shipments are once again stripped and re-consolidated with pallets brought in from various other terminals, and then hoisted onto a linehaul truck headed to the LTL’s service center in Los Angeles². From there, the supplier’s pallet is put on a P&D truck and delivered to the OEM’s facility in South LA (or whatever).

In my last Old Dominion post, I described an LTL network as follows:

You can think of the P&D routes that propagate around service centers as refined roots that soak up freight and direct it to larger linehaul tributaries that redirect it to other service centers, where that tonnage eventually bleeds into other P&D routes. It’s like an organic, self-nourishing complex in which each strategically placed service center node contributes to the health of every other.

There are several key differences between LTL and FTL carriage.