The turbulent economy has knocked the less-than-truckload (LTL) transportation industry off balance, according to the Supply Chain Consortium's Domestic Transportation Report.
"With an ever-increasing number of companies turning to smaller shipments and multi-stop truckloads, LTL has been feeling the pinch for a while," says Chris Ferrell, Associate Director of the Supply Chain Consortium and author of the report. "The variable nature of LTL shipments has left carriers with smaller volumes, despite making the same number of pickups and deliveries. So revenues are decreasing while costs are holding steady--not a good place to be right now."
With the economy in flux and very few alternatives for carriers available, Ferrell expects many terminals to close and the industry to consolidate through contractions and mergers.
"Certainly, well-capitalized carriers with a desire to expand will be able to add network density at what is likely to be bargain prices," he adds. "Either way, the issues facing the LTL industry are not likely to be solved until the supply/demand equation is brought back into competitive balance."
The Consortium's Domestic Transportation Report covers truckload, less-than-truckload (LTL), parcel, and intermodal transportation and shares an overview of how the economy, the federal government's stimulus package and fluctuating fuel costs have made an impact on the U.S. transportation industry.
Key points from the report include:
1. 2009 has the potential to significantly change the domestic transportation industry for years to come due to the federal government's intensified interest in issues such as national infrastructure investment, reducing dependence on foreign oil, and aggressively addressing environmental issues.
2. Although opportunities exist for them to secure favorable long-term capacity commitments at reasonable rates, all shippers need to be careful with their endeavors, including reducing rates and extending payment terms.
3. For parcel service, companies need to remember to check out smaller, regional alternatives and the United State Postal Service to ensure that the industry continues to have a variety of options and competition.
4. Finally, although fuel prices are down now, they are expected to rise again. Companies are advised to resist the temptation to use monetary savings from low fuel costs to offset other budgetary shortcomings.
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