The capacity crunch has been a core concern of shippers for several years, but as 2018 draws closer to the holiday shopping season, it will become a bigger problem. LTL capacity has routinely been used as a source of added capacity when full truckload becomes unavailable. Unfortunately, the worsening of the driver shortage is pushing more full truckload carriers to turn existing trucks into LTL space. LTL capacity is quickly becoming harder to find, and full truckload carriers have already started to turn away freight. Meanwhile, LTL carriers struggle to meet on-demand needs, so shippers need to know a few LTL capacity best practices to ensure their freight can be moved on time and without added costs.
The Problem With Securing LTL in the Midst of a Capacity Crunch
As explained by Jeff Berman via Logistics Management, LTL capacity woes are increasing. LTL carriers have always been seen as a way to navigate tight capacity in full truckload, but the increased use of LTL capacity today means the ability to respond to on-demand shipping is diminished. Also, up to 75 percent of major LTL carriers, forming 90 percent of the LTL market, are turning down freight due to lacking capacity. At the same time, FT carriers, incapable of providing FT service are turning down freight in favor of diverting resources to the LTL market. The added competition will help mitigate rate gains, but it is only a bandage over the problem.
LTL Capacity Is Both Resilient and Fragile at the Same Time
Part of the reason for increased use of LTL freight rests on driver wages and treatment. In LTL, drivers can make significantly more in annual salaries than FT drivers, and as noted by John D. Schultz of Logistics Management, benefits for LTL drivers may also be higher. Some of the top 25 LTL carriers are now offering $10,000 bonuses to drivers who stay with the company for at least one year, and the same tactics are being in used FT. Unfortunately, there are not enough drivers to go around, so knowing how to navigate the shortage through LTL is essential to controlling freight spend.
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LTL Capacity Best Practices to Keep Freight Spend Under Control
According to Todd Johnson of Supply Chain Brain, shippers need to start thinking about how to ensure drivers and carriers want to continue the relationship. It is a real relationship, requiring fairness, kindness, and respect, and being a preferred shipper, also known as a shipper of choice designation, is a great start. Some of the critical characteristics of a preferred shipper include:
- Offer open availability to other necessities, like restrooms and even showering facilities. Making drivers feel welcome to your facility, including the creation of breakrooms to give drivers an opportunity to rest can both improve driver mental state and reduce the impact of detention on HOS records.
- Limit the amount of time spent waiting for loading and unloading. Any conversation about the importance of keeping drivers happy must touch on the need to be on time with loading and unloading. Unnecessary delays in the yard will adversely affect HOS adherence and impact drivers’ ability to perform their duties.
- Communicate delays. When delays do occur, drivers should be kept informed. This may also help drivers picking up multiple shipments in a local area by rerouting trucks to avoid unnecessary waiting.
- Be understanding of driver mistakes or tardiness. There will be times when drivers are late or make mistakes. Shippers should be reasonable and understanding when uncontrollable issues arise.
- Provide convenient, well-lit parking areas. This tip is similar to creating driver-rest regions, but it is also focused on making drivers’ entries and exits from a yard easy.
In a Nutshell
The shipping surge will continue. E-commerce growth for 2017 was just shy of 3 percent, but that number has already been exceeded in 2018. With the holiday shipping season expected to bring even stronger gains for retailers, demand on carriers for more capacity and faster shipping will reach its tipping point. Shippers that have not yet created a plan and implemented LTL capacity best practices will be hit hardest with record-breaking spot rate hikes and even refusals from carriers. However, the surge in e-commerce could benefit small and mid-sized LTL carriers and bring renewed competition to the sector. Up next, we’ll take a look at why this is happening and what shippers can do to use it to their advantage.