The LTL industry rolled out of 2003 in an exceptionally solid state thanks to the mid-year upswing in the U.S. economy, continued low inventories, growth in regional manufacturing, shrinking capacity due to the loss of carriers, and shippers' worries about the hours-of-service (HOS) rules, which started pushing more freight into LTL trailers.

"I've been in this business a long time, and I haven't seen anything quite like this," says Gerald Detter, president and chief executive officer of Con-Way Transportation Services. "Last year was like two separate years—the first half and the second. It's as if somebody flipped a switch in July and got the momentum going." And it has continued to build, says Detter, straight through the end of 2003 and right into the first and second quarters of 2004. "Right now the LTL industry as a whole is as close to being used up, from a capacity standpoint, than it has for some time-maybe ever."

Logistics Management columnist and transportation-pricing watchdog Ray Bohman couldn't agree more with Detter's assessment. In Bohman's view, if the U.S. economy stays its course and supply chain managers continue to insist on maintaining low inventory levels, the LTL sector is poised for more good fortune—as long as carriers keep working to meet shippers' increasing demands.

So far, says Bohman, they've been equal to the task. "Now that supply chain management has gained more importance inside companies, you're seeing that the carriers are being more responsive to shipper needs, and that means faster service," he says. In 2003, one of the major focal points for LTL carriers was shortening transit times, particularly in major lanes. "Where they had five-day service, they worked on cutting it to three; where they had three-day service, they worked on cutting down to two—all while moving to 500-600 mile next-day delivery," Bohman observes. "Every carrier is looking to speed up every service."

That increased need for speed and reliability has put the pressure on LTLs to perform, says Douglas Duncan, president and chief executive officer of FedEx Freight. "For years shippers and suppliers talked about managing supply chains and just-in-time inventories," he says. "For many years that was all talk. However, over the past five years shippers have become very good at [managing their supply chains], and they keep compressing time frames and inventory levels. If you look at the changes in the LTL industry," Duncan continues, "they have nothing to do with the carriers and everything to do with the businesses we serve."

There's little change forecast for the key drivers of the LTL market over the course of 2004. Bohman foresees steady, healthy growth for carriers as they continue to focus on giving shippers what they want: faster transit times and improved reliability.

While this is a good time to be in the LTL business, Detter says, even the strongest carriers need to be responsive to the changing business landscape. "Sometimes the market dynamics fall on the side of the buyer; sometimes they fall on the seller. Right now, there's a tilt toward the seller, but we're such strangers to this that we may not know how to react to it. It's been a long, long time since the sellers of truckload and LTL services have had the pendulum on their side."