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Market Conditions Create A High Road For LTL Carriers

It’s a great time to be a less-than-truckload (LTL) carrier. In State of LTL 2021: Bull market, John D. Schulz at Logistics Management (LM) magazine said that unlike in past years, “2021 will likely be one where a fortuitous combination of pricing discipline and high barriers to entry meet an industry determined not to waste what’s likely a once-a-decade pricing conundrum for shippers fueled by growth in e-commerce.”

Satish Jindel, president of SJ Consulting, a firm that closely tracks the LTL market, told Logistics Management that in one sense the pandemic was a blessing for the entire LTL market because the related surge in LTL shipments was driven by government stimulus checks that helped boost consumer spending.

That once-in-a-lifetime environment coincided with a surge in e-commerce that plays right into LTL’s strength, the article noted. LTL carriers, it pointed out, are accustomed to delivering many loads in a single truck and only need slight adjustments to handle last-mile e-commerce freight.

With the 25 largest LTL carriers controlling 90 percent of pricing, Jindel explained, they began flexing their muscles in the third quarter of last year. 

“They were getting high, single-digit increases without a sweat,” he stated. “And because fuel surcharges are down, that means they’re getting strong pricing in mid- to high-single digit increases.”

Rate Increases: How High Can They Climb?

Analysts and top trucking executives say that it isn’t a question of whether rates will go up, it’s only a matter of how high those rates will climb in 2021, Jindel noted, a conclusion supported by a report in FreightWaves. In LTL carriers continue to issue general rate increases, it cited increases by leading LTL carriers, adding that “the majority of the increases are in the 5 percent to 6 percent range, likely indicative of tightening LTL capacity and a rate-disciplined environment.”

In its JOC Rankings: US LTL sector rebounding on rising share of retail freight report prepared by SJ Consulting Group, the Journal of Commerce reflected on how retail and e-commerce freight is taking up more space in LTL trailers. 

“LTL carriers increasingly are delivering freight to big-box stores, shopping centers, and other locations, especially in urban areas,” it reported. “That also includes the delivery of some large and bulky goods straight to consumers’ homes.”

Consumer Trends Create Opportunities for LTL Carriers

E-Commerce Impacts on the Trucking Industry, a report by the American Transportation Research Institute (ATRI) pointed out that e-commerce is altering retail business models and distribution/fulfillment networks. 

“The trucking industry is in a unique position to adapt to and prosper from these consumer-driven trends, as the more fragmented retail ecosystem has forced retailers to become more reliant on their logistics partners,” the report stated.

“Trucking industry stakeholders are still adjusting to the implications of decentralized retail distribution/fulfillment networks and the growing demand for shipment and package deliveries in densely populated regions,” ATRI concluded. “Even more, carriers are tightening up their operations to accommodate shorter delivery windows and faster turnaround times required by emerging retail business models.”

Technology’s Role in Promoting Operational Efficiency

As e-commerce growth drives up demand for less-than-truckload transportation services, LTL carriers are looking at a prolonged period of rate increases. Now is the time to use rising LTL rates to improve profits, specifically when increased organizational efficiency is achieved by using a modern-day transportation management system (TMS).

So, where do you begin? It starts with the right technology partner. Fortunately, Trimble is here to help. 

Contact us today to find out how our portfolio of solutions, including a wide range of TMS platforms, can help you stay ahead in the face of changing market conditions.