CPIM Practice Exam

Which tends to increase when shipments are by full truckload rather than less-than-truckload?

1. Pickup and delivery costs

2. Materials handling costs

3. Billing costs

4. Carrying costs

The correct answer is: Carrying costs

When shipments are made by full truckload (FTL) rather than less-than-truckload (LTL), carrying costs tend to increase due to several factors. Full truckload shipments generally involve larger quantities of product being transported at once, which may result in longer inventory holding times at distribution centers or warehouses if the goods are not sold immediately upon arrival. This can lead to higher carrying costs, which encapsulate expenses associated with maintaining inventory, such as storage costs, insurance, depreciation, and opportunity costs related to capital tied up in inventory. In contrast, LTL shipments, while they may incur higher costs per unit due to the nature of consolidation and handling smaller loads, can help reduce carrying costs since products are often more readily available and distributed more quickly. Thus, the larger volume and potential for extended storage time associated with full truckload shipments contribute to an overall increase in carrying costs when compared to using less-than-truckload deliveries.