The LTL Capacity Crisis Survival Guide for Shippers

Plenty of ink has been spilled over the truckload capacity crisis but what about less than truckload (LTL) freight? Unfortunately, the reach of the national truck driver shortage and capacity crunch is now at the point where it's touching the entire inland transportation market. Jill Clifford, Vice President of Aborn & Co., recently sat down with Consulting Logistics to discuss her investigation into the state of the LTL market.

( listen to the episode at the bottom of this article )

Shippers trying to create time and uncover rate relief by splitting loads across multiple trucks and carriers are finding little luck in 2018. As service problems abound, capacity is king over nearly all other considerations. This sea change from a rate dominated, price prioritized relationship between carriers and shippers is something this market hasn't experienced in over a decade.

The Shippers

Let's be honest, for years shippers have been telling carriers to dance when they tell them to dance. Shipping was looked at as a necessary evil and carriers were considered a means to an end. This has set a-number-of expectations regarding payment terms, dock conditions, behavior, and delivery times that are incompatible with the new normal.

Moving goods has become Amazon Primeified. Cheap, fast, and nobody cared if the delivery guy drove up in a brown truck or a white truck as long as it got there in 2-days or less. Shippers who maintained this impersonal and distant relationship with carriers are hitting the wall head on and hardest of all. That's because shippers have a serious pick-up and delivery problem. That's only one line item on a long list of issues that they must contend with.

"Shippers are saying it's a carrier problem, but you know what, if your freight isn't moving and your customers aren't receiving their orders, it's your problem." said Clifford to Consulting Logistics.

Transportation managers can circle the wagons and lay blame on the carriers but there's no resolution in that defense. Instead, we need to circle back to shipper of choice. Shippers who make carriers' lives easier are finding capacity at a greater rate than their indifferent competitors. There's a reason for this, shippers aren't the only ones with a major problem.

The Carriers

The current state of the LTL market is the sum of a half dozen variables. Added together, a robust GDP, higher consumer spending, online retail sales, outdated technology, ELDs, and a national truck driver shortage combine to equal a lack of available trucks.

In order for shippers to operate and prosper under this stress, they need to understand their carrier's concerns. To facilitate that, we've polled and interviewed several of the largest regional and national LTL carriers in the United States regarding these market conditions and the problems they're facing. After all, their problem is your problem if you're a shipper.

Problems

The following statements were compiled from dozens of interviews and surveys with some of the largest regional and national LTL carriers in the US. These are their responses in their own words:

Volume

• Our "normal" shipment levels are 42-45,000 shipments a day; we have been experiencing YTD an average of 50,000+ in our system
• Our average daily tonnage capacity is 58M pounds; we have been experiencing 63M+ per day
• We have seen numerous record shipment count days thus far this year and are trending well above our forecasted bill count.
• We have seen double digit bill count growth each month this year thus far which is well above forecast.
• Depending on the month we have averaged between 9,500 and 10,000 shipments per day with some record days over 11,000.
• Tonnage is up by double digit percentages thus far this year as well.
• Our tonnage is up +12%
• Our shipments are up +8.4%

Equipment

• Truck manufacturers are delayed in delivering new equipment orders by as much as 9 months, so we have placed our orders for 2019 already.

Infrastructure

• Our facilities are overloaded, and we need to add terminals

Driver Shortage

• Our industry was struggling to find labor before these conditions, but now we face an estimated shortage of 100,000 professional drivers nationwide.
• We anticipate the capacity constraints will continue well into the back half of 2018 and see a number of hurdles for the industry longer term with the driver shortage, limited investment in infrastructure expansion and escalating costs, especially in our region.
• LTL networks are the most capital intensive in the business and it is hard to ramp up quickly to meet demand because you are always running lean to keep just enough labor around to service the business as that is our number one expense.
• The professional driving force is aging, so much so that the average age of a professional driver today is 55 years old. Young professionals are largely no longer considering driving as a first career choice. We find ourselves in a labor market characterized by sub-4 percent unemployment, competing against industries which offer comparable pay, with the added benefit of providing more time at home with family and friends.

Solutions

• We are implementing new technology solutions to help our drivers from a routing and administration perspective.
• We've opened 3 new terminals YTD, with 2 more planned.
• [We] operate two truck driving academies in an effort to invest in creating new drivers.
• [Our company] has a hiring and training program that's designed to grow our driver force and manage attrition through departures and retirements. We hire employees who don't have a CDL and start them as dock workers. While working the sorts, [we] will train these workers on the job to get behind-the-wheel experience and help them get a CDL license. Keep in mind that we have s ome of the most desirable driver jobs in the business because most are home every night. That's not the case in the truckload industry.
• Each [of our] service centers has begun to establish relationships with local high schools to develop an apprenticeship program for high school seniors and graduates who are considering entering the workforce after school. We are teaching these new employees our business and preparing them to become drivers so that by the time their friends are graduating from college they will have a well paying full time job as a CDL licensed driver.
• We've hired 300 drivers and are looking to add 300 more.
• [Our company] is offering an option for some customers who are interested in guaranteeing capacity through a contracted dedicated program.
• When demand increases this quickly we are very conscious of ensuring we protect quality service for our customers. Where necessary we take a close look at business that may not be covering our costs.
• We can no longer handle business that only has contribution against cost. We need to invest in our people, technology, equipment and network in order to provide the service levels our customers expect.

End Game: Shipper Solutions

The scope of the transportation issues facing the US are so pervasive that nearly every response from the carrier pool was homogenized. What should be of most concern to shippers are the last three responses on that list. Carriers are creating capacity for themselves by being more selective about which shippers they partner with. They're no longer willing to, and don't need to pick-up freight from shippers who not only exhibit bad behavior but also those that offer little value. Transactional relationships and rate shopping tie up capacity and return little value to carriers.

Sometimes you have to make your own sunshine to make a break in the clouds. Shippers who are willing to be proactive and adapt to these changing market conditions will find favor with their trucking partners. Those that haven't aren't without hope as there is plenty of opportunity to improve.

As Jill Clifford offered on the podcast, here are the first three steps every shipper should take to capture capacity, buy time, and save money.

1. Self-awareness: Know your own company, know your operations, and know your dock.

"If you're a shipper, you really need to understand how your freight moves in the LTL environment and what that means to the carrier."

2. Technology: Invest in a TMS. Tech allows you to bring all the right visibility for you and your carrier partners.

"If you don't have a TMS, your hands are tied behind your back."

3. Carrier Relationships: Form partnerships with your carrier base, follow shipper of choice guidelines, and avoid transactional relationships when possible.

"Start treating your carriers and their truckers like they're an extension of your company."

Concerned about your supply chain costs going up? Contact a trusted adviser at Aborn & Co. today for a complimentary consultation and learn how we have successfully negotiated over $5 billion in client freight expenses.