In our recent GlobalTranz 2022 Logistics and Supply Chain Trends and Outlook white paper, our experts review some of the factors that will shape logistics in the coming year and beyond. It covers macro trends in the LTL, Truckload and Managed Transportation Service sectors and the lingering effects of the COVID-19 pandemic.
In this post, we’ll do a deep dive into less-than-truckload (LTL) industry trends to watch for 2022, and highlight actions that shippers should consider to guide their strategy throughout the year.
LTL Industry Macro Trends
The LTL market is transforming in response to the fundamental change in how goods are moving from production or import to the last-mile distribution to consumers.
As a result, many shippers are revising their strategy from just-in-time inventory to just-in-case based on the hard lessons of the past two years. Experts predict LTL rates will continue on the upward trend through the first quarter of 2022, reaching a new high on a per-pound basis. While the future is unclear beyond that, the macro factors driving rates aren’t likely to move in the right direction anytime soon.
Three Factors Shaping the LTL Industry
While the LTL freight industry market conditions change for a variety of reasons, here are three of the top factors that will be part of the day-to-day reality of LTL freight and some of the strategies that can help shippers navigate rising costs and complexity in the supply chain.
Tightened Capacity
Labor shortages will have a lasting effect, effectively reducing capacity for carriers and terminals. Currently, the driver situation in LTL is not as critical as the over-the-road market, primarily because LTL drivers can spend more time at home, but carriers still don’t have the drivers they need. Government and industry initiatives to attract more people to the trucking profession should help alleviate the situation in the long term. However, the driver shortage will still be a factor in the short term.
Accessorial Fees
Expect diligent application of accessorial fees and surcharges as carriers reclaim costs and incentivize shippers’ behavior to improve efficiency. Fuel surcharges simply reflect rising fuel costs, but accessorials can quickly raise LTL shipping costs as carriers levy fees for additional services like liftgate use and delivery/pickup appointments. In colder months, Protect From Freeze services could add cost to your rate and time to your transit, as carriers attempt to reroute equipment to protect freight from extreme temperatures. Monitoring your invoiced accessorials and surcharges will help identify freight optimization opportunities to reduce shipping costs significantly.
The accessorial/surcharge situation reflects carriers’ strategy to select freight that’s optimal for their network. Shippers with reasonable pickup and delivery requirements and freight that facilitates efficient space utilization will likely be able to secure capacity compared to those who don’t accommodate carriers’ priorities.
Consolidation
Many shippers in the retail space are shifting toward smaller, more frequent shipments for fulfillment and replenishment, but that takes planning and coordination to a higher level of complexity. Consolidating shipments to fit LTL networks can reduce costs compared to parcel shipments and offer more flexible service compared to truckload options.
9 Keys to LTL Shipper Success
As your organization defines its strategies for success this year, consider these factors to help weather the potential for disruption and position your supply chain for greater efficiency.
- Compete for capacity. Higher rates won’t guarantee capacity. Carriers also consider the speed of pickup, consistency in demand, accurate capacity forecasts, payment terms and digitized document processes.
- Communicate expectations. Proactively convey customer and budget expectations for increased rates and delays.
- Use expedited service. Consider specialized direct expedite service for time-sensitive deliveries to meet customer expectations.
- Leverage regional LTL networks. Use a logistics partner with connections to carriers across the country to bypass the high-demand market leaders.
- Partner with an MTS provider. Outsourcing the tasks of securing capacity, managing shipment performance and integrating technology can help mitigate the frustration of rapidly changing supply chain trends and ensure you have the resources available to address new trends as they develop.
- Leverage TMS technology. Cloud-based transportation management platforms help digitize operations to rate, book, track and manage LTL in one solution. Integrate with existing systems to automate repetitive processes and manage by exception.
- Consolidate shipments. Seek out opportunities to consolidate moves into truckload or fewer LTL loads/deliveries that could reduce accessorials and surcharges.
- Manage claims. Because LTL freight is handled more often, improving claims management can reduce losses from damage or shortages.
- Classify freight correctly. Ensure freight is classified right the first time to avoid re-weigh or re-class fees and recover shipping costs in sales more accurately.
Managed Transportation Services (MTS) interest remains strong
As you navigate the complexities of LTL shipping, consider the value of managed transportation services (MTS) and outsourcing your transportation and logistics to a third party. The MTS provider, often a 3PL, manages shipments, carrier relationships and load tracking. Throughout 2022, we expect companies to increasingly consider adding an MTS provider in order to achieve greater transparency in the supply chain.
An MTS partner can insulate your company from some of the day-to-day stresses of securing capacity by connecting your company with a carefully curated portfolio of LTL carriers who are among the top-rated, compliant offerings in the marketplace. They can also drive fulfillment network and mode selection to improve operating efficiencies. This partnership provides flexibility in planning and helps to supply the resources needed to adapt to new conditions. In the meantime, your team can focus resources on their core competencies.
The outlook for 2022 features more of the same challenges as 2021, from capacity and labor shortages to rising rates and fuel costs. Knowing more about the LTL trends for 2002 will help you build the agility and resilience you need to stay ahead for these challenges.
Preparing your supply chain to face these evolving LTL industry trends requires a dedicated partner with proactive advice and deep industry knowledge. Request a consultation from GlobalTranz today to have a shipping expert reach out to you.