Follow us on Twitter!
Blog Header Logo
DG&A's Transportation Consulting Blog
Posted by on in LTL Freight
  • Font size: Larger Smaller
  • Hits: 7071
  • 0 Comments
  • Print

The “Fun” is Back in the LTL Freight Industry

As I look at the LTL freight transportation today, it is hard to believe that just a few years ago, this was one of the most battered sectors of the freight industry. The LTL freight industry took a tremendous pounding during the Great Recession as business volumes contracted by about twenty-five percent. As operating margins shrunk, LTL carriers closed or consolidated terminals and cut staff in an effort to right size ether businesses. Shippers took advantage of the situation by conducting multiple freight bids to leverage their volumes to extract rate concessions.

Seven years later, the industry has changed dramatically and the pendulum has swung back in the carriers’ favour. As volumes return to pre-recession levels, LTL carriers are finding their networks full of freight. As the North American economy improves, manufacturing is on the rise. The near shoring movement is also bringing some manufacturing jobs back to America. In addition, the driver shortage is making it difficult to find drivers, particularly for long haul truckload routes. A clogged intermodal system is limiting the opportunities to divert over the road truckload freight to the rail system. The net result is that some of this freight is being diverted to large LTL shipments so it can move with an LTL carrier. In other words, this is creating traffic for an already full LTL system.

Unlike the truckload sector where even the largest players control only a small (single digit) percent of the total truckload sector, the LTL industry is highly concentrated among a core group of companies. The top 9 LTL carriers in the United States (e.g. FedEx Freight, Con-way, YRC, UPS Freight, Old Dominion, Estes, USF Holland, Reddaway and New Penn, ABF, R & L Carriers and Saia) control almost seventy percent of the LTL market. In Canada, the major players, TransForce (e.g. TST Overland, Canadian Freightways, Kingsway, QuikX, Quiktrax, Clarke Transport and Vitran), the Day and Ross Group and Manitoulin would also control a major share of the LTL market. With limited capacity and pricing discipline, this gives this group of companies considerable pricing power. With high quality costing models, these companies can now seek meaningful rate increases or de-market poor paying accounts. In other words, the “fun” is back in this business.

To further improve yields, FedEx Freight and UPS Freight are introducing density based or dimensional or cube-based pricing. I wrote about the potential of this trend years ago(http://www.dantranscon.com/images/downloads/mtr%20sep_oct%202009.pdf) and it is finally starting to take hold. Just as airlines charge for “bums in seats” and adjust their plane sizes to each route and the potential passenger traffic, LTL freight carriers are going to become much more diligent about charging shippers for the cubic space occupied on their trailers. Shippers with poor packaging, who don’t nest their products effectively or don’t design their products well or load them smartly, will face a nasty surprise. With so much industry consolidation, it won’t take long before dimensional pricing becomes more standard across the industry.

Another reason why LTL carriers are having more “fun” is in their attitudes toward logistics service providers. A few years ago, 3PLs were viewed as the enemy. They were seen as trying to poach LTL customers and replace their carriers by taking control of the direct customer interface. Times have changed. LTL carriers are increasingly viewing 3PLs as business partners. They are forming alliances with companies that have common objectives and customer profiles so they can collectively bring value to the customer. The large LTL carriers are going a step further by creating their own internal logistics or at least freight brokerage arms.

The terminal networks of the large and even medium-sized LTL carriers serve as barriers to entry. As a result, it is not easy to establish an LTL freight business as it is a truckload business. This is producing some new models of LTL carriers. In addition to marketing alliances between regional LTL carriers (to expand market coverage) such as the Reliance Network, we are also seeing the creation of asset lite or even non-asset based (technology driven) LTL players. Roadrunner Transportation Systems and FreightQuote are just two of the companies now targeting this sector using these new models.

The thrill was gone in 2007 and 2008 but the fun is back in 2014.

 

To stay up to date on the latest trends in freight transportation, click here to obtain a free subscription to Dan’s Transportation Newspaper (paper.li/DanGoodwill/1342211466) and join the Freight Management Best Practices group (www.linkedin.com/groups?gid=4357309) on LinkedIn. Follow us on Twitter @DanGoodwill.

0

Comments

  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest Thursday, 28 March 2024

Most Recent Posts

Search


Tag Cloud

YRCW dimensional pricing Canadian Protests Freight contracts consumer centric IANA Packaging professional drivers 2014 freight forecast Truckload 2014 freight volumes CRM Failure shipping wine derailments Outsourcing Sales future of freight industry carrier conference LinkedIn freight RFP Justice transportation audit Climate Change Toronto Maple Leafs shipper-carrier collaboration customer engagement cyber security Masters in Logistics Transport Capital Partners (TCP) Transplace Canada NMFC economic forecasts for 2012 President Obama Emergent Strategy financial management driverless TMS shipper-carrier roundtable freight costs Comey mentoring LCV's pipelines Geopolitics Trump General Motors Transportation Buying Trends Survey Software Advice Dedicated Trucking CSA Colilers International freight transportation in 2011 Facebook Yield Improvement Muhammad Ali Associates Freight Capacity driver pay capacity shortages cars robotics Government Value Proposition APL Inbound Transportation Hockey computer security Accessorial Charges Sales Management Freight Rates TMP Worldwide KCS small business driver shortages Railway Association of Canada Training New Hires MBA supply chain management hiring process Dedicated Contract Carriage FuelQuest Loblaw Freight Matching Twitter Business skills shipper-carrier contracts natural disasters Coronavirus Transportation service home delivery Deferred Packaging broker bonds Wal-Mart solutions provider ShipMax ELD rail safety Social Media in Transportation Toronto automation Celadon Business Strategy Rail Life Lessons freight bid technology Entrepreneur trade Infrastructure Warehousing Freight Leafs Canada's global strategy CN business security computer freight payment freight audit home delibery CSA scores JB Hunt asset management cheap oil Canadian economy BlueGrace Logistics Harper Davos speech employee termination NCC Amazon 2014 economic forecast NAFTA Crisis management Canada U.S. trade Social Media Regina economy dark stores Distribution Business Transformation Strategy 2012 Transportation Business Strategies. Jugaad energy efficiency network optimization 2013 Economic Forecast drones 2015 Economic Forecast autonomous vehicles Rotman School of Business Dan Goodwill Sales Strategy Grocery Freight Shuttle System NS Schneider Logistics Cleveland Cavaliers Freight Recession laptop small parcel CSX coaching Job satisfaction Conway Education Freight Management dynamic pricing routing guide Transcom Fleet Leasing Global experience Habs transportation news FMS freight transportation Global Transportation Hub buying trucking companies Driver Shortage Right Shoring recession US Auto Sales Electric Vehicles Transloading Crude Oil by Rail FMCSA Ferromex RFP Adrian Gonzalez Driving for Profit New York Times USA Truck Freight Carriers Association of Canada Retail Reshoring Microsoft Online grocery shopping freight marketplace Scott Monty digital freight matching truck driver truck drivers Werner e-commerce Keystone Pipeline University of Tennessee Canada-U.S. trade agreement YRC Map-21 Tariffs Trucker Protest Transportation freight agreements Success failure entrepreneur Tracy Matura US Economy bulk shipping computer protection Stephen Harper Trade Vision Whole Foods US Housing Market marketing truck capacity Doug Davis Leadership transportation newspaper LTL CITA Shipper Pulse Survey US Manufacturing Spanx Canadian freight market Fire Phone China Digital Freight Networks Otto tanker cars trucking company acquisitions Search engine optimization UP Management Sales Training Career Advice Consulting Hudsons Bay Company Blockchain Digitization Blogging freight payment EBOR ProMiles Montreal Canadiens the future of transportation Canadian Transportation & Logistics Finance and Transportation Load Boards Impeachment Donald Trump peak season US Election selling trucking companies last mile delivery Horizontal Supply Chain Collaboration USMCA 3PLTL Trucking FCPC CN Rail intermodal capacity shortage Retail transportation $75000 bond autos Training Surety bond 360ideaspace Anti-Vax 3PL Swift FCA shipping broker security Broker Success David Tuttle risk management CP Rail freight cost savings Load broker Covid-19 freight transportation conference freight rate increases Omni Channel fuel surcharge Sales freight broker Shipper driver freight audit Bobby Harris business start-up freight forwarders Doug Nix BNSF Derek Singleton Uber Freight Carriers Canadian truckers online shopping Business Development MPG Politics TransForce Rate per Mile economic outlook

Blog Archives

March
February
December
October
September
August
June
May
April
March
January