Winter is coming. Time to bundle up and prepare for the cold weather and new industry news that will affect your LTL shipping in the coming months. We trust (well, maybe “trust” is a strong word) that the guys on Wall Street know the industries they’re working with, and the same goes for you: as an LTL shipper, you should understand the industry you’re in. We doubt that logistics forums and editorials are your “thing,” so we’ve done your homework and prepared a bite-sized snapshot of the LTL industry to keep you up to date on all the hot news and how it will affect you as a shipper.
Business is good—or at least better than it was. As the economy creeps back to its pre-2008 levels, so too has the LTL sector, which now represents a $35 billion chunk of the national freight industry. Increased consumer spending has driven demand for LTL shipping. But, capacity in LTL is very limited—both by carriers and drivers. Increased demand and a limited capacity mean higher prices for shippers: expect base rate increases in the 3-5 percent range, according to our friends at Logistics Management. While capacity hasn’t completely maxed out, shippers are losing some of their bargaining power against carrier pricing.
Calling All Drivers!
Qualified freight drivers are a dime a dozen these days. According to the Chief Economist at FTR Associates, Noel Perry, the trucking industry is currently about 100,000 drivers short of full utilization of 3.5 million. Not good, and not getting any better. Hiring certified truck drivers is difficult for carriers: the unemployment rate is declining, driver-training schools lack students and the current, typical driver demographic is aging. Expect increased driver wages and other perks to meet growing demand.
Regulations on the Rise
Regulations (and lots of them) are just over the horizon. The federal government is working to enact new regulations to make long-distance trucking safer and better for the environment. Think restrained driving hours, stricter drug testing and new required pollution-control equipment. The list of impending regulations keeps going, which ultimately means higher shipping costs as freight capacity is further constrained.
Dimensional weight pricing (DIM) is #trending. Carriers are looking to cash out on empty trailer space, or at least charge you more for low-density shipments taking up excessive space. LTL carriers are investing in new imaging technology to scrutinize your shipment’s space requirements and classify it (or re-classify it). The effect of DIM pricing will upset the traditional 18-class system we all know and love, and force shippers to be more efficient with packaging and volume optimization.
It’s a Carrier’s World
It’s time to prepare: an onslaught of higher freight demand, driver shortages, federal regulations and new pricing standards will take the LTL industry by storm. The combination of impending industry changes will affect LTL capacity; or as Stiefel trucking expert John Larkin puts it, “[result in] the mother of all capacity shortages.” While a drastic rise in freight costs (to the tune of 15 to 20 percent) isn’t forecasted for another few years, the effect is immediate—the LTL freight industry is becoming a carrier’s world.
Shippers will lose their bargaining power to determine prices as carrier capacity shrinks. An industry supply shortage means carriers can get picky—favoring certain shippers over others to fill their trucks. Those who can pay more will get to ship. This will affect smaller shippers the most, who will have to spend excessively on Third Party Logistics Providers to get volume discounts in order to remain competitive.
OK, time for some good news. FreightorGator also extends volume discounts to LTL shippers, without the hefty service charge. The FreightorGator freight exchange makes shipping as easy (and cheap) as it needs to be so you can stay ahead of the curve with all LTL industry changes coming your way.
Get more info on the importance of getting to Know Your Carriers here: