The less-than-truckload (LTL) market has, like the rest of the worldwide economy, been through an unmatched period of turmoil over the last two years, due to the pandemic and its effects. Now the current year is throwing a new set of challenges at LTL shipping even as COVID-19 seems to be fading from the picture: rising diesel prices, inflation, and ongoing capacity restraints. Logistic Management’s First Annual LTL Study, conducted by Peerless Research Group (PRG) and based on feedback from over 180 buyers of logistics and freight transportation services, gives some insight on what’s next for the LTL market.
The Picture on Rising Rates
An overwhelming number of respondents to the survey noted that their contract rates had risen from 2021 to 2022, with 79% saying they had increased. Of the remaining portion, 17% said rates had stayed the same, and only 4% experienced a decrease. A similar proportion indicated that they expected rates to rise again from 2022 to 2023—78% forecast further increases, 19% said rates would hold steady, and 3% foresaw a dip.
The reasons participants believed rates would go up are familiar and numerous. They included fuel increases and surcharges, driver and labor shortages, increased expenses for equipment and assets, inflation, e-commerce demand tightening existing capacity, supply chain bottlenecks and backlogs, increased overhead for LTL carriers, and capacity unequal to demand as factors contributing to this expectation. With labor, real estate, equipment, and fuel all going up in price, there is considerable pressure on the LTL market to raise rates. In fact, 40% of the study’s respondents expected double-digit increases to rates in the coming year.
Respondents to the survey also detailed problems they’d had in managing capacity, with over half saying that securing LTL capacity had been a problem at least some of the time. While 42% said it was rarely or never a problem, 50% said it was sometimes a problem, and 8% said problems usually or always occurred. Among the reasons for these difficulties, they cited carrier unavailability, driver and terminal labor shortages and delays, delays in expected delivery time and dates, high levels of demand, and issues finding carriers to support surge capacity.
Many of the LTL shippers surveyed said that they worked with carriers on a contractual basis. Over half—58%—said they had taken steps to partner with LTL carriers, while the remaining 42% had not. Respondents mentioned better pricing, more visibility, improved ability to secure capacity, improved troubleshooting, better communications, smoother scheduling, better pickup times, and enhanced understanding of shippers’ needs as benefits of such partnerships. Even so, over a third of the survey respondents—37%—said they secured loads and capacity via the spot market at least occasionally.
Experts in the LTL industry expect to see demand continuing to outstrip supply in the near future. They also point to the tight labor market as the single largest factor influencing LTL costs. Limits to available equipment and real estate may also play a role in ongoing capacity constraints.
Service and Solutions
Throughout the pandemic, Total Transportation & Distribution has been working tirelessly to maintain predictable, reliable service to our customers throughout the Southern California area. Our focus on providing efficient, economical solutions for your shipping and distribution needs has not changed in the face of unpredictable industry conditions. Now more than ever, we’re committed to delivering the outstanding customer service our loyal customers have come to expect.
With both an online tracking system and dedicated customer service staff, Total Transportation ensures that you have full visibility into the status of your shipment, whether you prefer self-service inquiries or hands-on assistance with your queries. Throughout our company’s history, we’ve made it our mission to stand by our customers and devise effective solutions when the going gets tough. As industry leaders in same-day and next day delivery services in Southern California, we’re here to serve you. To find out more about Total Transportation’s competitive pricing and responsive service, contact our team here.