For 2021, expect the Less Than Truckload (LTL) freight market to remain volatile due to the impact of COVID-19. Many LTL industry trends, such as capacity constraints, rising rates, and changing consumer buying patterns, will continue through 2021.
The fourth quarter of 2020 gives us a glimpse into the freight market forecast for 2021. E-commerce sales boomed in categories such as groceries and retail. As e-commerce surged, LTL, truckload, and small parcel capacity tightened, which lead to record rates in some lanes. LTL shippers should start 2021 prepared for higher freight rates due to LTL capacity constraints.
Let's look at top LTL industry trends for 2021.
Four LTL Industry Trends Shippers Should Prepare For in 2021
Increase in LTL Shipping Rates
Shippers should expect the price increases from Q4 2020 to continue into Q1 2021. If you ship desirable high-density freight, expect to see rate increases in the 5-8% range. Shippers with less desirable freight, such as big and bulky items, should expect LTL freight rates to increase 5-10% to offset the lower density.
What's behind the anticipated LTL shipping rate increases? Here's a look at three key factors.
The Driver Shortage Will Impact Capacity in 2021
When a driver gets a positive COVID-19 test, the carrier's terminal is shut down for safety measures, removing capacity from an already tight market. Carriers anticipate this will continue to impact LTL capacity until a vaccine is widely available.
Also, the average age of LTL drivers is in the mid 50's and older. Many drivers took early retirement due to the COVID-19 risk factor, and those drivers haven't been replaced.
LTL driver positions are typically sought-after because most drivers are home every night. However, that factor alone is not attracting enough drivers to handle the surge in capacity. Carriers are tackling the driver shortage with job training programs that target younger truck drivers and transitioning dock workers to straight truck drivers at age 18 since a CDL is not required. While these are positive steps, they're not likely to adequately staff the national driver pool.
Surging E-Commerce Orders Will Cause LTL Shipping Rates To Increase in 2021
Like many industry sectors, LTL carriers underestimated the e-commerce boom resulting from the COVID protocols. In response, LTL carriers are investing in straight trucks with lift gates for smaller businesses, strip malls, and residential areas. They're also integrating with local cartage agents and white glove carriers specializing in commercial and residential deliveries of oversize items, like furniture and exercise equipment.
LTL Freight Volumes Will Remain Volatile in 2021
Carriers faced a whipsaw effect through the year as they struggled due to low volumes during the height of COVID-19 shutdowns. However, volumes are extremely high now, and carriers are struggling to keep up. Volumes are expected to remain elevated through Q1 2021 at least. If strict shutdowns return, volumes could drop if many shippers are forced to close. Or, they could spike again in response to higher consumer demand.
Tips for LTL Shipping Success in 2021
Plan for rate increases
Carriers will be cautious about raising rates and instead may reject undesirable freight by issuing embargos rather than raise rates dramatically. Many carriers are walking a fine line of balancing rates and their operating ratio, which is why shippers should prepare by understanding the reasoning behind LTL rate increases in 2021.
Analyze your freight profile
Do you typically ship less desirable freight such as bulky furniture? If so, be prepared for freight increases and higher rates of rejection. When shippers look to balance out their networks during a capacity crunch, they will typically reject larger, bulkier freight that takes up extra space.
Be a shipper of choice
Don't waste carriers' time or money by making them wait or reschedule appointments. Recognize drivers as a vital part of the supply chain and make their lives easier. Also, use a TMS to pay freight bills quickly.
Set customer expectations due to capacity constraints. Be realistic, and factor missed pickups and late deliveries into your planning. For time-sensitive shipments, use priority service or expedited when necessary.
Consider consolidating freight
Consolidating LTL into TL hauls carriers may boost capacity, but shippers need to be prepared for significant delays.
Be cautious on forecasting
Expect transit delays and missed pickups and create forecasts accordingly. You may not see service levels equal to the first quarter of 2020.
Partnering with a 3PL will be critical for 2021 LTL Shipping Success
In 2021 shippers should be prepared for more of the same market volatility they experienced in 2020. To succeed, leveraging partnerships with 3PLs that can ensure your load is covered will be critical.
When you work with GlobalTranz, you gain access to our qualified carrier network, around-the-clock logistics support, and market-leading technology via the GlobalTranz TMS. Our logistics experts can help you optimize your LTL shipping program for whatever 2021 may throw your way.