Top LTL executives see continuing upward rate pressure on shippers in ‘22

Top trucking executives say their relentless rise in costs for everything from new and used trucks to fuel and driver pay will cause them to continue to ask shippers to pay more for freight services in 2022.

How much more? That depends on individual shipper demands, their freight characteristics, and how their tonnage fits into a carrier’s overall freight demand scheme.

“There will be many different influences at play when it comes to the conditions of the LTL marketplace in 2022,” Kent Williams, who assumed retiring Phil Pierce's position of executive vice president of sales and marketing, at Averitt Express, the nation’s 13th-largest LTL carrier, told LM.

Williams started his Averitt career in 1987 as a sales associate. Through the years, he was promoted to service center director roles in Montgomery, Birmingham and Orlando before becoming regional vice president of operations for Florida. In other words, he’s seen some ups and downs in the freight market—and this current environment is a rough one for shippers, he said.

“For months to come, I expect we will continue to see a lot of upstream pressure on domestic transportation, due to the ongoing backlog of cargo ships and containers,” Williams said. “Those imported raw materials and products feed heavily into the LTL marketplace.

More than 1,800 shippers took part in Averitt's 2022 State of the North American Supply Chain Survey. Some 76% of respondents anticipated shipping more freight in 2002 than they did in 2021. 

“It's apparent that consumer demand shows no signs of slowing down any time soon,” Williams said.

But LTL carrier executives said there were several challenges in both global and American supply chains that we will all have to face together this year.

“There are no easy fixes to the challenges that shippers may experience in the LTL marketplace or within any other segment of the supply chain this year,” Williams said.

Carriers are helping LTL shippers navigate these unique times. For instance, Averitt is encouraging customers to take advantage of crossdocking at its facilities located near seaports. This allows them to invest in staging safety stock within its distribution and fulfillment centers, and to consider using inland ports such as the Appalachian Regional Port in Georgia or Inland Port Greer in South Carolina.

These are a few ways carriers and shippers can work together to bypass some of the congestion and avoid potential per diem and demurrage fees.

“Simply put, it's going to take a bit of time for LTL capacity and demand to reach an equilibrium,” Williams predicted.

Averitt, which celebrated its 50th anniversary last year, has grown from only hauling goods between Livingston and Nashville, Tenn., to now servicing the global supply chain needs of shippers across every industry.

“From day one, our vision for Averitt has been to be proactive rather than reactive,” Williams added.

For example, its Averitt Distribution and Fulfillment has more than 2 million square feet of space across dozens of facilities in the span of just a couple years, Williams said.

“We know consumers are moving increasingly online, and many of our customers need a solution for it,” he added.

As for pricing, Averitt is like most LTL carriers in that they work with their customers on an individualized basis. “This can involve developing customized supply chain strategies for many shippers because a turn-key solution may not be efficient,” Williams added.

Shippers are expecting rate increases in 2022, and carriers are more than willing to delivery. In its recent supply chain survey, some 71 percent of Averitt shippers said they expected LTL rates to increase in 2022.

“As a nation we are contending with inflation and rising fuel costs,” Williams said. “As a result, rate increases are a real likelihood across the nation and around the globe. Just as most retailers don't intentionally increase their costs because they can, we're all contending with the invisible hand that guides the market.”

Still, LTL carriers and transports in general are facing dueling headwinds. Beside the significant driver shortage that has impacted the industry for years, now carriers are challenged with securing equipment due to the semiconductor shortage and struggles of the global supply chain.

“Simply put, the industry is having a very difficult time coming up with enough equipment and drivers to satisfy the demand,” Averitt’s Williams said.

Old Dominion Freight Line (ODFL), the nation’s second-largest and most profitable LTL carrier, added 1,800 drivers last year to handle its more than 50,000 shipments each day.

While some of that freight is new business from new accounts, ODFL officials emphasized that existing customers get a bit of preference in this tight freight environment.

“First and foremost, our strategy has been to look after our existing business,” Kevin “Marty” Freeman, ODFL executive vice president and COO, told LM. “Those were the ones who brought us to the dance.”

Asked if ODFL was becoming more selective in its business strategy, Freeman demurred.

“I wouldn’t say ‘selective,’ but we manage our capacity very well,” he said. “It’s not like we pick out customers. But from a loyalty and profitability standpoint, we take what best fits into our business model.”

At times, ODFL nudges shippers into better operating procedures to help it save time and money.

“A lot of our freight is retail to distribution centers (DCs),” he said. “Some of those DCs were not properly stocked with labor to unload our trucks. We had to manage that freight so when we send a truck in there it can be unloaded in a timely manner. We help manage trailer pools. We do that because we need that equipment to run the outbound freight.”

Like most carriers, ODFL deals with a nationwide labor shortage in the service sector. “One of our biggest issues is labor shortage with our customers.”

Still, Freeman said the drive for trucking efficiency continues in spite of COVID-related shortages and flare-ups and changing freight patterns due to uneven demands.

“I don’t think any of us have ever been through a pandemic of this nature,” Freeman said. “For the most part, our customers have reacted well with the hand they’ve been dealt. From labor shortages to tie-ups at West Coast ports, I think they’ve reacted well. We’ve all learned from our adventures with the pandemic.”

Like most freight executives contacted by LM, Pitt Ohio President Chuck Hammel is suspecting these uneven conditions will be with us for a while – the so-called, dreaded “new normal.”

“I don’t see any end to masks and other restrictions due to COVID,” Hammel said. “We’re entering our third year of this now. I think this is the new normal – until it’s not. “This is not a return to the old days. The new ways of business are becoming habit. Some 70% of workers want to work exclusively from home. We’ve all become used to Zoom calls. I don’t think the old ways are coming back.”