In an effort to alleviate supply chain disruptions and increase shipment flexibility, many shippers are opting to employ less-than-truckload (LTL) freight for their products. From business to business, there are a multitude of reasons that a shipper would elect to utilize LTL shipments over full-truckload (FTL). LTL has always been an important role in the supply chain, with LTL-oriented firms making up about a quarter of all trucking roles while simultaneously making up nearly half of the truckload sector revenue. LTL shipments have been steadily growing in popularity, especially since the start of the pandemic. This, among other factors, was fostered in by the so-called “Amazon effect”. The appeal and success that Amazon has had with same-day, time efficient deliveries set an industry precedent that still has yet to be matched. The pandemic showcased Amazon’s capabilities pertaining to LTL shipments, making anywhere from 200-300 deliveries per day, per truck. The success of less-than-truckload shipping suggested to businesses, specifically smaller-scale ones that do not require consistent shipments large enough to fill an entire truck, that this way of operating would not only meet their needs- but exceed them.
For some shippers, this pivot would be extremely beneficial. After all, why pay for the space of an entire truck when the product in question doesn’t require a full trailer? Some shippers even opt for LTL shipments as a last-minute necessity, needing shipments at a destination at a very specific date and time. However, with every action taken in the freight industry, there is an equal and opposite reaction. How exactly will growing usage of LTL freight affect the industry and market as a whole?
Now nearly 3 years since the beginning of the pandemic, the blooming usage of LTL has experts expecting the sector to grow 2% annually for the next 5 years. This notion comes with the anticipated increase in rates for future LTL shipments, which are already typically more expensive than the use of full truckloads. This is observed in many aspects, but the one that speaks most to this notion is the unprecedented rise in purchased transportation (PT) expenses. As LTL grew in usage over the course of the pandemic, so did the price it cost to finance a shipment from beginning to end. In as little as 4 months, PT expenses ballooned 300 basis points, or 3%. While a 3% increase may not be mind-blowingly extreme, a spike in prices this large in a rather short span is rather worrisome. If nothing else, it showcased the volatility of the freight market when firms jumped ship to emulate Amazon’s success. Unfortunately, the LTL sector is susceptible to changes such as this due to capacity issues, moreso that truckload shipments.
In conclusion, LTL shipments can be extremely valuable to shippers that don’t require high-volume shipments, and can afford to pay more per load. However, for shippers who require a large volume of loads or move sizable freight with each load, LTL will be vastly more expensive if used consistently. With LTL costs only set to increase, having an awareness of what you demand out of your supply chain can lead to both increased efficiency and diminished expenses.