LTL Market Demand Surge Expected by End of 2020
There was a severe trucking capacity crisis leading into 2020, which only had just begun to resolve when COVID-19 struck. The result? A growing LTL market.
The full truckload market (FTL) has been incapable of addressing trucking shortages from the previous years, including the pandemic-related capacity deficiencies. With trucking capacity even tighter in the COVID-19 era, shippers are looking now more than ever towards less than truckload (LTL) to open up capacity in a tight transportation market. The LTL market is already seeing a major surge in demand, and it may even peak higher heading into 2021.
So, what is causing the rise in LTL demand, and how can it help address the current capacity crisis and rising truckload rates? We shed light on the factors contributing to the growing LTL popularity.
LTL handles last-mile logistics and distributed inventory
The purpose of LTL is to fill up trucks with a variety of multiple clients’ goods to optimize space and plan out the most efficient, low-cost route. When dealing with last-mile logistics or distributed inventory, utilizing LTL is an efficient way to get goods to their closest end destination without extra space, cost, or movement.
With a boost in e-commerce, particularly for the holiday 2020 season, a strong majority of truck shipments are of the last-mile: sending goods from the warehouse or distribution center directly to the doorstep of the consumer. FTLs aren’t equipped to handle last-mile logistics. They’re made more for long-haul routes and unloading at distribution centers. Smaller LTL truckloads, even sometimes white-van LTLs, can bring goods through that “final mile” with reduced costs and more efficient routing.
Similarly, for carriers who have a distributed inventory model, filling up an entire truckload of products is often not the most efficient route. Even when traveling long distances, it can often be more effective to fill an LTL shipment with different products that are going to the same location to optimize the route and minimize empty space on the truck.
LTL has reduced costs
In some cases, shippers don’t have enough product or volume to require a full truckload.
To purchase the space needed for a full truck is significantly more expensive. Furthermore, to not use all that space is a waste of capacity for the entire industry. Since LTL shippers combine multiple clients in one truck, each shipper only pays for the weight and space of their particular freight. This dramatically reduces costs for individual carriers while optimizing available capacity, both of which are especially important in times of such demand volatility.
As we’re bound to see truckload rates spike in 2021, LTL’s reduced costs are going to be even more attractive and in-demand than ever before, including for large companies with high quantities of goods that can no longer afford the tighter margins of the FTL model.
LTL reduces emissions
Most companies want to reduce their carbon footprint, particularly now as social changes are moving heavily and quickly in that direction. LTL shipping increases the fill-to-capacity rate while reducing the number of partially-full trucks on the road. With fewer wasted space, we get lower carbon emissions and better fuel economy.
In a world where green is king, in more ways than one, reducing the cost of fuel and streamlining routes is critical to the happiness and social responsibility of both the retailer and the retailer’s client.
LTL offers more customized service
Supply chains are growing increasingly complicated, international, and interconnected. No two retailers have the same shipping routes, distribution center plans, or logistics needs. FTLs have a more rigid transport model, while LTL allows for more flexibility in terms of distribution centers and available services. For example, LTL freight shipping could offer expedient shipping, custom delivery windows, and “limited access” shipping; FTL is limited in some of these areas.
LTL also allows for higher transparency and responsiveness, which is the key to running a successful supply chain and mitigating potential risk.
As the logistics world gets more complex and interrelated, and supply chain weaknesses are becoming more known and present, retailers are turning to LTL for customized services that meet their unique transportation and warehousing needs.
Third-party logistics providers handle everything
Third-party logistics providers (3PLs) handle a good portion of LTL shipping. In some cases, 3PLs manage everything for their client, from finding the capacity to negotiating contract rates to ensuring compliance and beyond. Retailers that don’t have strong logistics processes can heavily benefit from the network of transporters, the advanced technology, the route planning, the short- and long-term strategizing, and the experience of working with a 3PL.
Get some resources on working with a 3PL here:
- How to Choose and Work with a 3PL Partner
- Top 10 Benefits of Working with a 3PL
- How Does a 3PL Benefit the Supply Chain?
- The 5 Best 3PL Companies for LTL Shipping
As LTL demand rises quickly, retailers are scrambling to find the right 3PL partner to meet their capacity and customization needs. Redwood Logistics isn’t your typical 3PL. We attack every angle of the supply-chain process and customize your strategic program to address your unique challenges head-on.
From flexible freight management to supply chain consulting to innovative tech implementations, everything we do is with the singular goal of cutting costs, eliminating waste, and streamlining your processes end-to-end.
We have a team standing by to start crafting your distinctive strategy moving into 2021. Our promises of agility, transparency, and expertise are more critical and imperative than ever before.