Transportation is the largest sector of the economy, making up 8.9 percent gross domestic product (GDP), reports the Bureau of Transportation Statistics. The simultaneous growth of the economy and trucking indicate actual GDP percentages would be higher if compared to the same time last year. In anticipation of the 2018 holiday shopping season, transportation trucking, including Less-Than-Truckload (LTL), Full Truckload (FT), Parcel, and intermodal, will increase in value. Shipping rates will continue to soar, and demand for more capacity will push the stretched industry to its breaking point, says Michael Angell of Freight Waves. Less than truckload shipping trends for the remainder of the year point to higher freight spend, stress for drivers and carriers, higher carrying costs for shippers, demand for integrated e-commerce shipping platforms, better last-mile service, that also provide white glove services, and much more.
1. Capacity Will Tighten Further
Capacity has run at nearly 100-percent utilization since the 2017 hurricane season. As noted by Trucking Info, the ability of companies to handle a sudden surge in volume will determine the outcomes for consumers as the holidays approach. As consumers take to their favorite retailers, also due in part to the strong economy, volume shipped will increase. With FT carriers already rejecting some freight that is too light (in the range of 5,000 to 10,000 pounds), demand for LTL options and capacity will increase.
LTL does have a slight advantage in this situation with the capacity available to absorb the increase. However, big rate hikes over the past year and a revolution for better treatment and pay for drivers will force LTL carriers to rethink their rates.
2. LTL Rates to Increase Monthly
Over the last year, rate increases in trucking have become commonplace. Statistic chances of seeing a month without a rate increase are 22 percent, so it is much more likely rates will rise in November, December and well into 2019.
[WHITE PAPER] The State of & Pricing Outlook of the Less than Truckload Shipping Market
3. More Shippers Want Less Than Truckload Options
Shippers have also faced the encroach of omnichannel, and it will affect demand for LTL as well. Omnichannel means working with more vendors and through more delivery and pickup options. Therefore, the ability to meet this demand requires a well-connected supply chain that can respond with LTL shipments as necessary. Furthermore, the days of shipping everything by Full Truckload are over. Consumers and shippers both want lower freight rates. LTL offers an opportunity to keep shipping rates in check, even with LTL rate increases on the horizon.
4. Rail Has Proven Troublesome for Intermodal Shipping
Demand for LTL will also continue as rail has proven ineffective for short-haul intermodal shipments. The ability to offer better rates will hinge on looking for intermodal shipping for short-hauls that do not necessarily use rail. In other words, freight consolidation for shipments by air and eventually LTL will become more valuable.
5. Warehousing Demand Is Increasing
Although warehousing is often dissociative with transportation, its impact will be felt now more than ever. Warehouse rental costs are up almost 20 percent, and in major cities throughout the country, actual rates have risen 200 percent. The stark costs of warehousing allude to the greater use of alternative warehouse methodologies, including drop shipping, just-in-time replenishment, and cross-docking. Tapping into the value of these methodologies will require greater use of LTL throughout the peak season and into next year.
6. Last-Mile Is the New LTL
Demand for attention in last-mile is the result of the boom in e-commerce, reports John D. Schultz of Supply Chain 24/7. Items of all sizes are being delivered to homes and workplaces, and although carrier costs for last-mile can be some of the highest in transportation, especially for rural areas, and carriers are not giving in. Simultaneous onboarding of new customers, including Amazon, can decimate your carrier-shipper relationships, namely spot freight abilities. Instead of trying to tap into the full value of an Amazon relationship, consider focusing on better last-mile service. Go a step further with automated delivery notifications, reduced delays, and faster deliveries. Also, remember that omnichannel makes last-mile delivery possible through pickup-in-store deliveries. This area will be a critical factor in managing freight spend as the year draws to a close.
Less Than Truckload Trends Will Continue to Evolve and Revolve Around Lowering Freight Spend
LTL is moving forward with more services, capacity, worker benefits, absorption ability, rate options and more. Shippers that want to make the final charge of 2018 successful must consider the role of LTL in all operations, including reverse logistics. Since becoming a more effective shipper hinges on giving customers what they expect, free and fast shipping, the ability to keep freight spend under control will define success or failure. The future of LTL is bright and glowing with eagerness for the peak season for 2018. How will you wrap up your calendar year and still meet customers’ needs?