The LTL shipping industry has seen recent growth due to an increase in ecommerce sales and tighter capacity as a result of the Covid-19 pandemic restrictions. As consumer demand shifts further and further towards an online shopping experience, many businesses both large and small are responding by shifting more of their focus to the online marketplace which has led to an increase in sales that must be delivered by less-than-truckload, or LTL freight shipping. Because of this, small to medium sized businesses will have an increasing demand for LTL shipping services to ship their products to their customers. Additionally, As the LTL shipping industry continues to adapt to these changes, it is expected that LTL shipping services will improve or be expanded. We will cover some of the emerging industry trends that are shaping the LTL landscape.
What is LTL Freight Shipping?
LTL refers to less-than-truckload. LTL is when multiple shippers’ freight is on the same trailer rather than having a single company’s freight exclusively on an individual trailer. Several LTL shipments are combined into one truck to fill it as near to capacity as possible. This is a great option for shipments that are between one and six pallets or any shipment that is less than 14 linear feet because it makes the most out of the available shipping space on a given truck. This is a beneficial for the shipping needs of small businesses.
Costs Will Continue to Rise
Customer acquisition costs, largely due to a robust freight market, have never been cheaper, but driver acquisition costs have never been higher. Several expense lines will grow in 2021 and beyond. Driver recruitment and hiring is the top priority as driver shortages are impacting the industry and many carriers are still in need of additional dockworkers. Health and wellness visits, which plummeted during the outbreak, need to be caught up and sales forces will begin to travel and entertain again. Add in general cost inflation, including annual wage increases of roughly 3% per year, and the added expenses associated with operating at peak levels every day and you get a scenario in which the overall costs of LTL freight are bound to increase. As demand has surged, most carriers have been forced to rely on purchased transportation more heavily to service linehaul needs.
Increasing Use of Transportation Management Systems
A transportation management system (TMS) connects multiple points throughout a supply chain to streamline the end-to-end transportation process for shippers and carriers. For example, TMS providers enable shippers to dim, weigh, photograph and record freight measurements accurately at the point of origin. TMS technology also helps shippers optimize their freight pricing across carriers and avoid costly overages while simultaneously helping carriers connect their unused truck space to nearby LTL shipments. Their data analysis helps shippers identify opportunities for improvement within their supply chains while also ensuring that all freight is accurately measured and shipped at optimized freight rates to avoid any surprise fees along the way.
Surging Ecommerce Orders Will Cause LTL Shipping Rates To Increase
Like many industry sectors, LTL carriers underestimated the ecommerce boom resulting from the COVID protocols. In response, LTL carriers are investing in straight trucks with lift gates for small businesses, strip malls, and residential areas. They’re also integrating with local cartage agents and white glove carriers specializing in commercial and residential deliveries of oversize items, like furniture and exercise equipment. All of these factors will lead to an increase in the rates that LTL carriers charge their customers.
Growth in Automation Will Continue
From driverless forklifts in warehouses to drones and delivery bots on jobsites, automated solutions will continue to be deployed across all facets of the construction supply chain. By using artificial intelligence and programmable tools to execute repetitive, high-risk or time consuming labor, LTL carriers can apply their human expertise and creativity to solving more complex problems. This shift to mechanized labor will also reduce onsite injury rates from preventable accidents, which keeps employees safe and lowers expenses related to insurance and workers’ compensation claims.
Digital Sensors Will Provide Cost-Saving Data
On the road, integrated apps and data sensors in trucks can let drivers monitor their engines and equipment for efficiency and maintenance problems, and help them avoid inefficient routes. In addition, camera monitor systems can give drivers a clear view of traffic conditions on all sides of their vehicle without requiring them to rely on side mirrors and blind spots. This can reduce potential accidents and ensure that shipments arrive safely and on-time. Some freight companies are also employing new technologies in their trucks that enable drivers to bypass time consuming weigh station stops (and potential fines for overweight loads) by instead providing drivers with real-time weight analysis data as shipments are loaded.
TMS and other third-party logistics solutions enable supply chains to become immensely flexible with regard to traditionally expensive overhead concerns such as storage capacity, fleet management and other big-ticket investments. Rather than purchasing equipment that may go unused during downturns in the economy (like the 2020 novel coronavirus shutdown), more supply chain managers are using predictive data to scale their available capacities up or down by using elastic logistics. Thus, instead of purchasing a warehouse or a new truck to accommodate a surge in new business, they may rent available warehouse space or partner with shared fleets on a sliding scale that depends on seasonal workload trends. This elasticity helps supply chains reduce fixed costs and enables them to invest in real-time solutions as their clients’ needs change.
Partner With a 3PL to Meet Changes in LTL Freight
One of the best courses of action to overcome these shipping challenges is partnering with a third-party logistics (3PL) provider. Based on their depth of experience, they can provide shippers with a more diverse perspective and the expertise to address these obstacles. They can provide the technology tools, scale and operational support shippers may not otherwise have at their disposal within the confines of their company’s budget. Many commercialize deals where their fees come from the savings they generate. This makes these resources significantly affordable and quick to engage without the typical budget hurdles in a fee based model. With the right digital tools and human support, shippers can build more sustainable solutions to help their network win regardless of LTL market conditions. Some of these strategies include but are not limited to:
- Leveraging technology to choose the right carrier, freight rate and service combination.
- Using 3PLs and expertise to directionally load and leverage spend to reduce costs.
- Setting carrier service KPIs and providing analytics on accurate carrier service.
- Enabling visibility, real data and problem resolution.
- Model and rationalize sourcing and fulfillment center network for the optimal inventory cost while still meeting client service requirements.
- Working with 3PLs to incorporate mitigation strategies to prevent supply chain bottlenecks.
- Creating customized tariffs and pricing programs based on company requirements.
- Integrating systems and data to streamline key decision points within supply chain data-driven analysis and decision making.
With the right logistics partner, shippers can successfully navigate the LTL shipping market’s changing landscape.
While facing these challenges ahead, the LTL industry is still poised to grow in 2021 and beyond. The best way to prepare for the future is to embrace technology and digitization. Technology and data are providing opportunities for innovation and optimization at every point in the construction supply chain, from suppliers and shippers to drivers and builders. As these systems continue to integrate more closely in the coming years, expect the use of AI, real-time information-sharing, and data-influenced decision-making to generate even smarter, faster and more cost-effective LTL solutions that increase efficiency from departure to delivery.The more data companies have about freight, transit times, lanes, carrier capacity and driver availability, the better off they will be to move forward.
If you are seeking logistics support we’d love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.