The LTL freight and parcel 2019 Outlook is expected to be a period of turmoil for shippers. Across the board, general rate increases are resulting in higher transportation spend for shippers of all sizes. In addition, uncertainty regarding the economy and government will undermine the initiatives to manage tightening parcel, and overall road freight capacity successfully. The days of using LTL or parcel exclusively are over. It is useful to combine and be versatile in the utilization of both modes in the age of e-commerce, and the size of today’s shipments can vary greatly. Shippers need to understand where the market stands in relation to LTL versus parcel for 2019 and how knowing more about the top trends affecting these modes will influence decision-making processes.
How Technology in Logistics will Shape Shipping in 2019
The Parcel 2019 Outlook Includes Rate Hikes
UPS announced general rate increases for 2019 to the tune of 4.9 percent for UPS Ground, UPS Freight, and UPS Air. However, list rates have been increasing year-over-year, and the general rate increases serve as an average; they are not necessarily representative of actual costs, including surcharges. In other words, using next day air service will have a higher rate increase. Unfortunately, such increases in the general rate will have a resounding effect on freight spend due to higher fuel surcharges and other rate charges.
For example, UPS also announced fuel surcharges and additional processing fees for packages without the proper package level detail (PLD). Meanwhile, the United States Postal Service has also announced rate increases for 2019, and other major carriers have followed suit.
Rate Increases Are Starting to Become More Frequent
General rate increases are not necessarily new, but they appear to be increasing in frequency. In 2018, major carriers announced general rate increases less than two times, but a strong economy and a boost in consumer spending will likely result in a subsequent general rate increase for major carriers, at some point in 2019. This likelihood will increase as the driver shortage worsens and capacity woes tighten.
LTL Carriers Are Expanding Last-Mile Delivery Options to Include Parcel-Like Services
According to Mark Solomon at Freight Waves, an innovative way carriers are approaching the issue of less than truckload or parcel shipping is through the introduction of new last-mile delivery services that would typically remain parcels. FedEx Freight is testing a last-mile delivery service in Dallas to determine the viability of the convergence of LTL and parcel freight. As more carriers explore new ways to bring LTL and parcel services to consumers at a lower cost, the likelihood of new services will increase.
Shippers Continue to Waste Capacity
As explained by Satish Patel via JOC.com, up to 15 percent of capacity is still wasted. Waste capacity is the ultimate antagonist in successful logistics management, and it is responsible for increases in general rate among parcel and LTL carriers. Unfortunately, carriers have little-wasted space when shipments are palletized correctly. In proper package stacking or failure to shrinkwrap, parcels could result in freight damage and errors during transport. The solution is simple; shippers should work to consolidate pallets and ensure they are taking advantage of all applicable services, including consolidating parcels into LTL freight where possible.
Carriers Are About to Abandon Deficit LTL Rating
LTL carriers have suffered from a terrible case of undervaluing their services. The concept of deficit rating results in poor profitability for carriers, and it often gives shippers a better rate for freight shipping. However, the days of deficit rating are coming to a close, and shippers will see the result of higher freight rates. As a result, shippers should begin the process of consolidating shipments and working to create a multimodal shipping strategy that will leverage both LTL and parcel freight management to secure the best rate possible
The Limitations of USPS and UPS Will Become Clearer
According to Pierbridge, parcel carriers have limitations, but those limitations are not necessarily always clear. Shippers see a shipment go to the carrier, but surcharges appear after the shipment on an invoice and instances of billing inaccuracies can decimate shipping planning and freight spend management. The limitations of USPS and UPS Will become more noticeable as the capacity crunch worsens.
The Big Picture
Rate increases make up the conversations in the LTL and parcel 2019 Outlook. Uncertainty over the frequency of general rate increases, consideration of consolidation practices, and knowing how to leverage both LTL and parcel freight services to reduce costs. Shippers need to understand the state of LTL and parcel freight to make informed decisions and provide a better level of customer service.