Rising costs of LTL transportation networks is nothing new. LTL freight rates have increased steadily since 2016, and LTL e-commerce is driving new distribution models, reports William B. Cassidy of JOC.com. Unfortunately, the ill-prepared shipper could face stiff setbacks in budgeting and loss of capacity with partnering carriers. At the same time, LTL is no longer about merely moving freight over the road modes (OTR); more carriers are moving lanes closer to ocean ports and considering the value of global trade as less-container load (LCL). LCL is basically the same as LTL via ocean routes. Dimensional pricing is becoming the standard, and shippers need to understand how LTL transportation networks must evolve to keep up with demand.
What’s Driving Demand on LTL Transportation Networks?
Many forces are affecting LTL transportation networks, ranging from e-commerce to the truck driver shortage. However, obstacles continue to exist for shippers seeking to utilize new less than truckload freight management capabilities and services, like poor implementation or lack of new, automated systems to track and tender freight. Fortunately, the costs of implementation of new technologies to manage LTL freight are also decreasing, asserts Michael Angell of Freight Waves.
[WHITE PAPER] The Current Factors Driving the Less Than Truckload Pricing Market
API penetration is becoming more accepted, and in fact, the ability to use API-based connectivity is a defining characteristic for shipper of choice, as well as carrier of choice. LTL and E-commerce growth continues at record levels, and automation in manufacturing is pushing more products faster to market. Such actions place a significant burden on full truckload, and some full truckload carriers are now turning away freight on the low end of the weight band to make space available, explains Deborah Lockridge of Trucking Info. For shippers, this means less capacity and higher charges to move freight with traditional means, and the only way to handle it will lie in the evolving state of LTL transportation networks.
Evolution of LTL Will Be Broad and Swift
The development of LTL transportation networks will take place much faster than shippers realize. LTL carriers are being forced into a unique position, taking on much more freight than in typical years. Deficit rating processes and higher fuel costs will force LTL freight rates higher. Shippers do not see why rate hikes continue; they simply see higher freight spend. Instead of simply passing along costs to shippers, LTL carriers will need to evoke change in their operations and move into the digital age. With many LTL carriers, up to 75 percent, still using paper-based processes, the need to digitize LTL shipping systems has never been higher. Fortunately, the decreasing costs of SaaS, TMSaaS and cloud-based TMS systems to manage freight will help small and mid-sized carriers become bigger players in the industry. At the same time, these technologies will give shippers more options for carriers and encourage the switch to modern, digital and easy-to-use freight tendering processes.
Another critical change affecting LTL shipping will be the integration of LTL and last yard services. Last yard is really the next rendition of last mile, requiring carriers to do more than drop packages at the doorstep. Customers want smart notifications of delivery, the option to have items delivered inside their homes or vehicles, and have new packages set up and installed properly, reports Deloitte.
How to Leverage Changing LTL Standards to Control Freight Spend
As LTL standards continue to change, shippers will need to take a few steps to take advantage of such changes. These steps include:
- Implementation of API-based and EDI-based technologies and platforms to manage LTL freight.
- Integration of LTL shipping processes within e-commerce platforms.
- Sharing of information regarding product set up, installation or other details for proper last yard delivery.
- Collaboration with LTL carriers to review new services and take advantage of them.
- Proper weighing and entering of freight dimensions to ensure accuracy in price quotes.
- Implementation of automated identification and data capture (AIDC) and other technologies to automate freight and inventory tracking.
The Big Picture
Shippers will face higher rates and less capacity in the coming year, and to meet surging demand, shippers and carriers will need to understand how LTL transportation networks will evolve. New technologies are decreasing in price and implementation costs, and the days of merely having shipments ready on time are not enough to ensure stripper or carrier of choice status. Shippers that take the time to understand how the industry is evolving can position their companies to keep freight spend under control and tap into the value of new services and shipping capabilities. One of the ways shippers will be able to achieve this feat lies in the gradual year increased use of digital LTL shipping practices, which will be discussed in further detail in the next post of this series.
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