In the past eight weeks we have been experiencing a slight decrease in domestic truckload rates as capacity loosened somewhat. However, rates and capacity in the LTL industry remain firm and show no signs of weakening. The LTL industry is not as sensitive to short-term capacity changes as the truckload market can be.
As evidence, here are several trends and behaviors that are keeping LTL rates strong…
- Spring and summer season is upon us. Carriers currently have a “wait and see” attitude as they anticipate the traditional increase of freight for spring and summer. In addition, drivers and dock workers’ pent-up vacation time gets used as summer begins which further amplifies the capacity crunch in LTL.
- Fuel tables require updating. With diesel fuel rates continuously exceeding $5 per gallon across the United States, LTL carriers have found the need to update any fuel charts that stopped pegging at less than $5. During this scramble, carriers have also taken the opportunity to correct uncompensatory pricing programs if needed. Some of these programs may have gone unnoticed had it not been for the fuel table updates.
- Accessorial services continue to be compensated appropriately. The trend to get paid for all services performed is not new. The most glaring…
- Extreme length shipments – and any other shipments which reduce dense capacity – have also been targets of accessorial fees.
- Appointment fees used to be commonly waived. This has started to change as exception-based freight and requirements need to be compensated.
- Residential and limited access fees have become more commonplace as those deliveries have become more frequent. Carriers’ pick-up and delivery routes are traditionally in industrial areas with multiple transactions occurring at one time. A residential delivery takes them out of their way with no complementary freight in return. And a delivery to a school or storage locker requires additional time because of lack of docks and/or receiving personnel.
- Rate subsidies are becoming less accepted. Traditionally LTL carriers considered pricing programs as a whole. In so doing they were willing to accept some less profitable freight as long as they were balanced with the more profitable freight. Technology-enabled costing model improvements have become more prevalent with LTL carriers, and as a result, less profitable freight is getting recognized quicker. Rate subsidization with minimum charges or directional freight patterns are becoming less frequent as more and more freight is forced to stand on its own merit. Additionally, technology like laser dimensionalizers have allowed carriers to more accurately and quickly determine freight characteristics and the corresponding NMFC classification.
- Capacity continues to be paramount in the LTL industry. In December of 2021, Central Freight – one of the top southern regional carriers and a top-25 LTL carrier in the U.S. – went out of business. Overall capacity continues to leak out of the LTL industry and carriers are intent on protecting the capacity they have. Critical to their operational success is driver and trailer efficiency.
- Drivers. Eliminating driver wait time at pick-ups and deliveries is being monitored much more closely. Shippers and consignees that unnecessarily delay drivers will be expected to pay commensurate fees. Technology with hand-held devices allows carriers to accurately measure any wastefulness of drivers’ time.
- Trailers. Physical trucks and trailers have become extremely difficult to purchase and obtain. To address trailer efficiency, carriers have resorted to increased judiciousness with the freight they accept.
- Density. Freight that does not stack or ride well has become less desirable. And if a carrier actually accepts this freight, high accessorial charges are expected.
- Usage. Consignees that do not unload trailers timely are getting recognized and penalized. Shippers that require drop trailers and do not turn them appropriately are getting recognized and penalized. Trailers can no longer be used as storage for carriers’ customers.
With the strong rate environment and capacity scarceness in the LTL industry, shippers can significantly help themselves by:
- Calculating the accurate weight or dimensions. Most – if not all – carriers have scales on their forklifts, and many carriers have laser dimensionalizers in their terminals. Inaccurate weights or dims on bills of lading will easily get re-rated and additional costs will result.
- Establishing the accurate class. Arguably the most archaic part of shipping LTL is the NMFC description needed on the bill of lading. This is also the most critical aspect of the rating system since the description leads to the associated class and ultimately the cost. Carriers are carefully reviewing questionable freight and re-classing whenever necessary.
- Anticipating accessorials at the time of shipping. As an example, if a shipment requires a liftgate at delivery, it is best to make that request apparent on the BOL. Doing so will keep the shipment from getting delayed at destination and also allows for the most accurate rate up front.
- Respecting the drivers’ time. Do your best to get carriers’ personnel and equipment into and out of your facility as quickly as possible.
- Scheduling, when possible, pick-ups one day prior. Giving carriers operational lead time will help them optimize routes and driver utilization.
All these trends can certainly paint a challenging picture but hopefully these suggestions will help. If you would like to discuss your specific situation our industry experts are available to assist you. As a leading 3PL, our team at totalsourcetab uses a unique combination of industry expertise, best-in-class technology, and award-winning customer service to simplify transportation management for our clients. We evaluate your transportation needs, discover efficiencies, and deliver the transportation solutions that are best for your business.
totalsourcetab services all modes of transportation, including truckload, partial truckload, less than truckload (LTL), intermodal, and expedited. Contact an totalsourcetab representative today
Mark Redini, Senior Vice President of LTL Pricing & Solutions