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Home » How to Beat the Capacity Challenge in LTL Shipping

How to Beat the Capacity Challenge in LTL Shipping

February 8, 2022
Lance Healy, SCB Contributor
The less-than-truckload (LTL) market has accelerated its transformation in the past two years due to the pandemic. Healthy economic conditions have caused a shift in consumer buying behavior, resulting in more online shopping. The truck driver shortage and labor crunch add to the capacity deficit. In the past, demand was predictable, but with inventory shortages, carriers went from drought to feast.

As freight volumes rise, carriers struggle to keep their networks balanced to meet the increased demand for freight. These challenges multiply as the pandemic, truck driver shortage and accelerated e-commerce growth continue to work together to create disruptions across the entire LTL industry.

The peak season started earlier than usual in 2021, and is pushing into February, 2022 because of inventory and capacity challenges. The driver shortage has been around for a while, yet labor challenges now extend to the dockworkers and mechanics level as well. Retention is an even bigger issue.

As the pandemic continues, capacity issues spread across the entire industry. With more consumers buying online, the weight per shipment has steadily declined. At the same time, volume increases are forcing shipments to spill over from the parcel market, adding to the capacity squeeze in LTL trucking.

The ability to access this limited capacity has become as important as price and service. When carriers get close to their limit, they look at shippers that are taking up most of their capacity, and determine whether they’re preferential shippers or not. Do these shippers detain trailers too long? Do they supply correct information on shipments? How quickly are invoices paid, and how often are damage claims filed? Are the shippers using application programming interfaces (APIs) to make the carriers more efficient?

At this point, carriers can pick and choose whom they want to work with. They can select the right shipper with the freight that meets their conditions. Shippers, for their part, need to change their habits and open the line of communications with carriers and third-party logistics providers. Increase transparency, and carriers will share what’s good and bad for their network. Shippers also need to ask where their networks are causing stress to the carriers. It might be a drop-ship vendor or certain customers that are affecting a shipper’s entire pricing. The more open the dialog, the better for both parties.

The employee retention issue can’t be overlooked. Carriers need to focus on their employees as much as on creative ways for maximizing capacity. Ask drivers what they want, and they’ll respond with higher wages and better benefits, as would any group of employees. But specific to LTL drivers are considerations such as easy pickup and delivery, and better predictability as to when they’ll return home at the end of the day.

The market demand is hot and growing, and carriers have resources to invest in their business to better prepare for continued demand in capacity. LTL carriers must use this time of prosperity to invest in technology to make best use of their resources so they can better adapt to changing conditions. Technology brings insights to create more intelligence and efficient operations for LTL carriers. Those that invest in upgrading their technology infrastructure will be better positioned for longer-term growth than carriers that choose to focus solely on increasing terminals and equipment. The leading carriers are those that can minimize waste and maximize profit from the first mile to the last mile, and everything in between.

Outlook: Five years from now, the LTL market will still be the second-fastest-growing segment in transportation, after final mile. The demand for LTL services will be synonymous with middle mile, with a focus on feeding local delivery networks more efficiently. This demand is already starting to fuel competition from sources outside traditional LTL, such as load boards that consolidate shared truckload shipments, and 3PLs that create virtual LTL networks.

Lance Healy is vice president, LTL Innovations, with HaulSuite.

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