Subscribe to our free, weekly email newsletter!


LTL Special Report: Rising out of the doldrums

Shippers should be bracing for higher rates and tighter capacity as LTL carriers get smarter and more sophisticated during the recovery.
image

“The days when shippers didn’t know about a fleet’s safety record are starting to change. They need to do their homework now.” - Bob Petrancosta, vice president of safety for Con-way Freight.

By John D. Schulz, Contributing Editor
August 01, 2011

The much-beleaguered less-than-truckload (LTL) sector, which has been the slowest part of the trucking industry to recover from the Great Recession, is showing signs of life. Because of that, LTL shippers should be bracing themselves for higher rates and tighter capacity as LTL operators are showing greater pricing discipline amid the toughest government oversight since trucking was economically deregulated in 1980.

The $31 billion LTL industry enjoys the distinction of being the only niche in trucking with significant barriers to entry. After all, truckload (TL) carriers running from point to point don’t need the sophisticated hub-and-spoke terminal networks that are the backbone of LTL operations. They only need a truck, a driver, and a customer.

LTL carriers operate differently. They have made significant investments on brick-and-mortar terminals and breakbulk facilities—the heart of their huband-spoke systems that are difficult to replicate. With this, there have been no significant entrants in the LTL sector in decades, allowing LTL carriers to charge higher rates than truckload. They’re beginning to price their services in smarter and more sophisticated ways, analysts say, charging extra for such services as home delivery, appointments, and freight with special equipment needs.

LTL carriers are also enjoying greater price discipline and boldness than they’ve displayed in several years. Already, LTL giants UPS Freight and ABF Freight System have signaled this new pricing acumen by announcing mid-year general rate increases of 6.9 percent, and others are expected to follow.


Visit the 2011 Quest for Quatlity Winners

NATIONAL LTL | REGIONAL LTL | TRUCKLOAD | RAIL/INTERMODAL
OCEAN CARRIERS | 3PL | AIR CARRIERS | FREIGHT FORWARDERS


home page

“The health of the LTL sector is better than it was a year ago,” says Satish Jindel, principal of Pittsburgh-based SJ Consulting, a firm that closely tracks pricing in the industry. “That’s because carriers are at the end of their rope in accepting sub-par operating margins.”

Because of pricing discipline and capacity restrictions, stock analysts are more bullish on LTL carriers than they have been in at least five years. David Ross, the respected trucking analyst for Stifel Nicolaus, has “buy” ratings out on a half-dozen LTL companies currently—Vitran, Saia, Roadrunner, ABF Freight System (largest unit of Arkansas Best
Corp.), Old Dominion Freight Line, and Con-way. He has a “sell” rating on just one carrier, financially troubled LTL giant YRC Worldwide, which despite $2.6 billion in losses the past five years, recently obtained a new $500 loan facility which should enable it to continue and perhaps invest in its operations.

“The question will be how disciplined the carriers can be in keeping a firm stance in rate negotiations and how disciplined they will be in adding capacity,” Ross advised in a recent note to investors. “We believe that a firm stance in pricing should lead to discipline with capacity additions.”

So, as the LTL sector prepares to capitalize on its improving profit margins, what do LTL shippers need to know?

About the Author

image
John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement (NAFTA) partners Canada and Mexico increased 4.4 percent from August 2013 to August 2014 at $100.6 billion.

As expected, global trade dipped from August to September but still saw annual gains, according to data issued this week by Panjiva, an online search engine with detailed information on global suppliers and manufacturers.

Transportation and logistics merger and acquisition (M&A) activity in the third quarter saw annual gains, which were driven by smaller deals in the trucking logistics, shipping, and passenger air sectors, according to data issued in the Intersections report by PwC this week.

With the holidays rapidly approaching, it appears retailers are not quite done getting inventory set up and on the shelves in time for what is expected to be a fairly active shopping season. That much was evident based on recent data for September volumes issued by the Port of Los Angeles (POLA) and the Port of Long Beach (POLB).

Join Industry Expert Adrian Gonzalez for this educational webinar on the tenets and the benefits of Closed-Loop Operational Management. You’ll learn how Closed-Loop Operational Management optimizes orders, inventory, and transportation concurrently, and how it is able to optimize large-scale problems on a daily basis.

Article Topics

Special Reports · August 2011 · LTL · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA