LTL's Quest for Market Share

LTL's Quest for Market Share

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An Invitation to Get Involved

At a recent gathering of supply chain professionals, I was asked to give my view on what the LTL trucking sector might look like five years from now. I gave it my best shot and, while I'm not a betting man, I feel awfully good about a forecast that can best be described as the quest for market share.

If you've been around the LTL sector for a while, you might remember when "The Big 3" was a metaphor for Roadway Express, Yellow Freight and Consolidated Freightways. If we ask ourselves which carriers represent "The Big 3" in today's market, it is not totally clear. A few miles down the road, however, it could carry the names of FedEx, UPS and YRC. Why? Simple, it all comes back to the quest for market share.

Consider the following transactions that have taken place since 2000. FedEx acquired American Freightways, Viking Freight Systems and Watkins Motor Lines. Yellow acquires Roadway to form YRC, which in turn acquires the entire USF LTL carrier group, and let us not ignore that UPS purchased Overnite Transportation. Sound like a lot of merger and acquisition activity? Brace yourself. The party has just begun.

More consolidation, and lots of it, is most certainly on the way. These entities are poised and ready to grow their market share to insulate themselves from both major and minor competitors. Honestly, no carrier may be deemed invulnerable to the deep pockets of hungry, multibillion-dollar transportation behemoths looking to expand rapidly to stave off their primary competitors. At present, the LTL sector is no different than schools of fish in the deep sea that consume smaller prey only to be gobbled up themselves by a larger predator. How big do any of these entities need to be? That question has no clear answer, but one thing is certain. Each of the new Big 3 is keeping a cautious eye on Deutsche Post and their DHL brand. With deep pockets of their own, they have long been rumored to desire a grand entrance into the U.S. LTL market.

Once the wave of consolidation begins to subside, the remaining players recognize that they will need to aggressively diversify their service portfolios to withstand the detriments of stagnant profits in a mature LTL market. Many of the major LTL players have already started down this road by offering niche programs such as reverse logistics, exhibit services, residential/white glove services, inventory management services, security based products, household goods services and flatbed service for LTL quantities. LTL carriers today are looking to differentiate themselves by offering newer and better Web-based technology. Some carriers are actually beginning to reposition themselves as total supply chain options on LTL and LCL cargo around the globe.

By 2012, we will see The Big 3 competing on a battleground wherein each strives to better the others on the basis of integrated service offerings encompassing everything from parcel to full truckload with numerous service choices in each segment. They will offer even more technology solutions - free of charge - and you will see a foray into true supply chain management. Carrier assets will be turned to advantages via postponement assembly services and contract warehousing.

 

Five years out, we won't be discussing long-haul carriers and short-haul carriers. We will be engaged in the process of evaluating global competitors vying for the opportunity to move and manage products around an ever-shrinking worldwide marketplace. It all sounds pretty intriguing until you consider that the quest for market share will mean fewer competitors. Fewer competitors mean higher prices. Fewer competitors will mean that shippers with less desirable freight will find fewer suitors, which means higher prices. No one believes that the threat of terrorism will subside in the next several years. This translates to greater security procedures and all of the expected and associated government regulations, which mean higher prices. The threat of terrorism and heightened security translate to an unstable world oil market, which means higher prices.

The good news for shippers is that while these titans of transportation engage in the battle for market share, desirable freight in attractive lanes will have aggressive pricing available for the next two or three years. The attractive pricing will dissipate with each passing acquisition.

Polakoff is president of TBB Global Logistics, a supply chain solutions service provider based in New Freedom, Pa.