Everybody knows speed kills. It kills reckless drivers every day. And lately, the growing demand for speed by shippers of less-than-truckload (LTL) freight is killing carriers that fail to respond to that trend.

"The only reason shippers settle for second-day delivery," says FedEx Freight President and CEO Doug Duncan, "is they haven't been able to find somebody to deliver it next day."

The marketplace is littered with trucking companies that could not meet next-day demand. In the Northeast alone, more than 125 sizeable carriers—those with at least 150 trucks—have closed since 1980. Nationally, the figure is estimated at more than 500.

Although other factors, such as high insurance rates, may have played a part in the demise of some LTL carriers, survivors clearly are focusing their efforts on next-day service. Yellow Roadway Corp.'s top executive, William Zollars, openly admits that access to next-day service was behind his company's $1.46 billion acquisition of USF Corp., a Chicago-based group of regional LTLs that delivers more than half of its annual $2 billion in shipments overnight.

Delivering next-day freight is a whole different game. It can't be "blended" with long-haul freight because a next-day operation must adhere to strict nightly cut-off times. That's why some analysts expect other carriers may soon follow Yellow's lead and buy their way into the next-day market.

"The next-day markets have evolved over a number of years," notes Leo H. Suggs, chairman and CEO of Overnite Transportation Co., which was bought by United Parcel Service earlier this year. Today, he says, next-day service is common on lanes up to 600 miles, thanks in part to the advent in the late '80s and early '90s, of "super-regionals"—carriers that can offer longer next-day lanes because they integrate several regional LTL networks. Still, shippers should beware of carriers that advertise next-day delivery on lanes beyond 600 miles, Suggs advises. "There is usually fine print, such as 3 p.m. cut-off times or premium charges to cover the cost of unloading and running pickup and delivery routes outside the normal business cycles," he explains.

What's likely to be showing up next on the LTL service menu? The Overnite executive predicts that carriers will add further service "refinements"—time-specific pickup and delivery, same-day delivery, and more night and weekend service in response to shippers' demands.

Boom Times

LTL truckers that give shippers what they want are enjoying boom times. According to Smith Barney analyst Scott Flower, who maintains a proprietary pricing index, LTL pricing in March rose 7.1 percent on a year-over-year basis to reach the highest index reading since June 1992.

Between February and March, LTL prices rose 1.2%—well ahead of the average 0.1 percent increase seen during that period over the last 12 years, he notes.

Even as carriers enjoyed that 7.1 percent increase, overall truck tonnage fell 3.3 percent in March, according to the American Trucking Associations' truck tonnage index. Nevertheless, LTL carriers are not being shy and are asking shippers for general rate increases averaging 5.6 percent this spring and summer.

They'll probably get what they ask for, Flower predicts. "Overall industry freight demand and pricing trends remain favorable," he says. That's because LTL consolidation and resulting capacity reductions in recent years bode well for the survivors to continue their solid pricing fundamentals. With fewer remaining players in the market, shippers can expect to pay higher prices for faster deliveries.