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There’s no contesting that 2020 brought about significant changes in nearly every industry, none impacted more notably than shipping and transportation. Everyone is anticipating the midnight horns and cheers that will ring in 2021, but a Times Square ball drop isn’t going to solve all the obstacles and challenges we will still continue to face moving into the new year.
In this article, we’ll highlight the key issues that are continuing to plague the LTL industry moving into the next year and the solutions that could help stimulate a turnaround towards success for the transportation industry. What are the ongoing concerns for the LTL sector moving into 2021?
Let's take a look at our LTL update for 2021...
A shortage of drivers and transportation professionals has been an ongoing concern in the industry for several years, but we’ve seen an even greater shortage constraint in 2020. In recent years, we’ve seen a driver shortage for four key reasons.
First, drivers must be at least 21 years old to obtain a commercial driver's license. That means recent high school graduates looking for work will turn to alternative careers. Thus, the transportation industry misses out on that initial influx of new hires (who could potentially become career drivers).
Second, the federal Drug and Alcohol Clearinghouse is now in effect, which works to identify Class A and Class B drivers who have a drug or alcohol violation. While the intent of the Clearinghouse is based on the safety and wellness of all drivers on the road, reports are showing that thousands of drivers have been put on probation or out of work due to this program, further tightening the shortage.
Thirdly, drivers are often underpaid and overworked. Drivers work long, exhaustive hours, and a lot of trucking companies undervalue their workers’ time. It’s hard to retain talent and attract new drivers when employees’ compensation packages and work-life balance still isn’t highly valued by a lot of organizations.
Finally, one of the biggest transportation employment competitors is construction. With construction rebounding and thriving, drivers are switching jobs to the construction industry, thus further depleting the driver pool. None of those concerns have thus far been properly addressed. Now, even further, we also pile on the impacts that have come from COVID-19. Drivers, especially long-haul drivers, are considered a high risk for contracting COVID-19. In an effort to keep themselves and their families safe, a lot of drivers have left the industry to seek “less-risky” employment. Furthermore, any drivers who have caught the virus are forced to quarantine for two weeks (like everyone else). As the pandemic continues on, risk is high and compensation for drivers is still low, so a lot of drivers have decided to switch career paths.
Overall, we’re seeing a major lack of manpower in the transportation industry. Not only are there not enough drivers, but there also aren’t enough dock workers, warehousing staff, and support employees. The reasons for these personnel shortages are similar to those mentioned above. Most notably, LTL workers are switching to the e-commerce industry for greater pay and better job security.
Thus far, we’re still not seeing a majority of LTL companies making the effort to provide better benefits for their employees, so their employees are leaving by the droves. If transport organizations want to reduce their shortages and enhance their businesses, it’s time to start focusing on the human aspect of the business.
It’s not just a shortage of drivers that’s putting trucks at a standstill… There also aren’t enough trucks for all the packages that need to be sent. Alongside the shortage of employees, there’s simply too much freight and not enough physical resources like trucks, shelving, and equipment to support the increased volumes. This is a twofold issue: a shortage of resources with an increase in volume.
First, there’s a scarcity of tractors and trailers along with facility restraints, particularly not enough dock space and terminal operating doors. We’re also seeing lane imbalances (headhaul versus backhaul) with a lot of trucks end up making the trip home with excess unused capacity.
Alongside these equipment deficiencies, we’re seeing a significant increase in packages sent. Some LTL carriers have experienced up to 4,000 additional shipments per day compared to 2019. Ecommerce has surged, especially in 2020 when even groceries and personal care products moved to online purchasing. Manufacturing and digital business are on the rise, and trucking companies haven’t figured out how to handle this increased flow of business yet.
A lot of LTL companies are looking towards automation to help relieve some of these shortage concerns, like self-driving trucks and warehouse robots. However, implementation is too slow and inconsistent for this to be the short-term solution we’re all looking for.
LTL carriers saw a slight decrease in operating costs in 2019, but these expenses have again skyrocketed in 2020 moving into 2021. What do some of these operating expenses look like?
Higher operating costs often mean higher costs pushed to shippers or a further tightening of LTL margins.
Transit service is at an all-time low. Including the aforementioned concerns, we’re also seeing that service is being impacted by wildfires, hurricanes, other natural disasters, the spreading of COVID-19 (especially in pocket areas), and an increase in west coast imports. Transit service is suffering while trying to battle these variables. On-time results are only about 80-85% for national carriers and slightly better with 85-90% for regional carriers, but clients are demanding so much more. LTL carriers are deploying new, temporary business strategies to improve these on-time results, but they might have positive or negative impacts for customers. Some of these strategies that could impact customers include:
Redwood Logistics is looking at strategies we can implement in both the short-term and long-term to increase the service for our carriers and clients.
Freight rates are rising due to all of the factors mentioned above: driver and worker shortages, capacity shortages, higher operating expenses, and poor service metrics. There are other factors contributing to increasing freight rates that are going to hit LTL carriers and shippers hard as well:
Bottom line: Carriers can improve their operating ratios through two strategies. Either 1) lower costs and losses or 2) raise revenues. Lowering costs is a lot harder, especially in today’s climate, and the results happen slower. Raising revenues through rate increases is fast and easy. That’s why so many carriers are simply raising rates, rather than addressing business strategy on the whole.
To summarize, in 2021, shippers can expect:
It’s going to be a hard year bouncing back from 2020. Redwood is here to help.
Although many of the issues outlined above are not in Redwood’s direct control, we will continue to fight for you. The LTL logistics group will leverage our operating experience, our carrier relationships, and our expertise to proactively assist your shipping operations.
If you're in need of LTL shipping support, schedule time to speak with one of our logistics experts to learn how we can help you navigate the LTL landscape.