Less-than-truckload (LTL) carriers have experienced significant increases in base rates and pricing contracts lately, and most are thriving despite inflation, ongoing capacity issues, and rising diesel prices. A lesser-known fact? Due to high labor and operations costs, many LTL carriers have plowed recent gains back into their businesses.
But how do logistics and freight transportation purchasers view LTL rates’ future as we navigate the rest of 2022 and head into 2023?
Let’s look at the responses from 180 logistics and freight transportation service buyers from Logistics Management’s “First Annual LTL Study” (recently conducted by Peerless Research Group).
Here’s what survey respondents see ahead.
Regarding LTL contract rates, 78% of the 180 respondents said they expect LTL carriers’ rates to increase from 2022 to 2023, with 19% expecting them to stay the same and only 3% expecting a decrease.
The survey showed that almost 40% of respondents expect double-digit increases, with 25% expecting a 10% to 14% increase and 13% expecting a rise of 15% or more. Roughly 42% of respondents expect an increase in the 5% to 9% range, while 12% expect an increase of less than 5%, and 8% did not know or were unsure. Respondents noted that rate-increasing factors from 2022 to 2023 ranged from demand exceeding capacity, fuel increases and surcharges, labor shortages, and driver shortages to inflation, equipment and asset expenses, tightening capacity, and supply chain backlogs and bottlenecks.
Regarding securing LTL capacity, 50% of survey respondents found it sometimes a problem, while 42% indicated it’s rarely or never a problem, and 8% usually or always had issues. Carrier availability, unauthorized accessorial charges, carriers missing same-day pickups, expected delivery time/date delays, driver shortages, terminal shortages and delays, and difficulties finding surge support all thwarted LTL capacity, according to respondents.
Respondents advised several approaches for shippers to secure LTL capacity with LTL carriers: Book out as far as possible, achieve better forecasting, push for core carrier programs, arrange needs earlier in the day, drop trailers with multiple carriers, partner with brokers and asset-based suppliers, and share lane forecasts and demands to secure LTL capacity.
And while many LTL shippers said they’re working with LTL carriers on a contractual basis, the LTL spot market is quite active: 37% of respondents indicated they secure loads and capacity via the spot market, 36% noted it’s less than once a week, 26% said that it’s monthly (or more), and 10% said they rarely use spot capacity (once every two weeks to less than once per month).
Regarding carrier partnerships, 58% of respondents said they had taken steps to partner with LTL carriers, while 42% indicated they had not taken any steps. Respondents noted partnership benefits like better pricing, more visibility, smoother scheduling, more success securing capacity, having reliable solutions when problems arise, and having better pickup times, communications, and understanding of shippers’ needs.
In the long run, it’s a good idea to invest in better tools and focus on things like better communications with carriers and advanced planning. If you manage your network well, you will wring as much profit as you can out of it, which measures how well you are operating your network. LTL carriers that use dynamic pricing tools like FreightIQ from Optym have happier customers. FreightIQ helps LTL carriers find, design, and implement the best rates for every facet of their network. Contact FreightIQ today.