US shippers turn to LTL, due to scarcer truckload space

US shippers turn to LTL, due to scarcer truckload space

A truck travels on a US highway.


US shippers struggling to book a truckload carrier are shifting business to the less-than-truckload (LTL) market, paying higher spot quotes to secure trailer space on what is generally a smaller trailer.

With truckload rates rising with no end in sight, shippers are reporting an uptick in freight sitting on their docks an extra day or two. This rollover freight may move a day behind schedule, but the additional time increases costs to the shipper. This is especially true as carrier rejection rates hover between 25 to 30 percent, according to fleet executives, and many begin the day overbooked — even before the doors open.

2018 – vastly different truck market than 2016, or even 2017

It is a vastly different market than in 2016 and early 2017. To keep their freight moving, shippers are calling less-than-truckload carriers to find a truck, and paying up to get the freight off their docks.

Although shippers are calling more frequently, LTL carriers have to be careful about what to haul because they also have long-term customers. With the growth of e-commerce, the LTL industry has been thriving for several years and many carriers have their hands full with their existing shippers.

“Basically we turn up the rates to try to make sure that our operations doesn't get overwhelmed with any heavy-weighted transactional type shipments, that may be more one-time in nature it's not consistent business that we would retain,” said Adam Satterfield, Old Dominion Freight Line chief financial officer. Old Dominion’s tonnage per day grew 15.4 percent to 35,351 tons.

“We certainly don't want to disrupt our normal LTL shippers,” he said.

Truckload freight, in some cases, is problematic because of the heavier weight of the shipment. The LTL carriers prefer to fill a truck with shipments from as many customers as possible, fully capitalizing on the three dimensions inside the trailer. The goal is to maximize the cubic space. An LTL carrier would rather fill the trailer with lighter shipments from 10 customers covering every inch of the trailer than two heavy truckload shipments reaching the US legal limit of 80,000 pounds.

““The issue tends to be it exhausts much needed capacity for higher-yielding LTL. Where it does make sense, at times, is in backhaul situations,” said Mike R. Moss, Ward Trucking chief operating officer. Rather than incur deadhead miles, spillover truckload freight would provide revenue to cover fuel, maintenance, and depreciation costs.

LTL carriers – long-term customers have priority

Dohrn Transfer Company, a regional LTL in the Midwest US, began to see the trend in February. Vice President Heather Dohrn told JOC.com that it has been a difficult balancing act between taking on new freight while also serving their core LTL shippers.

“We have to protect capacity on our trailers for LTL customers and allowing truckload accounts to take over one-half of a trailer on an LTL pickup could keep us from being able to provide the on-time service that our regular customers expect,” she said. “We set temporary guidelines to control the volume per shipment, which has helped, but the weight per shipment has climbed.”

Averitt Express said that it has made adjustments to its shipping tariffs to ensure its LTL network can handle the truckload spillover without degrading service for their existing shippers.

“Foremost, we’ve introduced over-length charges to help keep each shipper on a level playing field,” said Barry Blakely, vice president of operations. “The primary issue that carriers have with truckload spillover is that it can limit the number of bills per trailer. If the situation goes unattended for too long, you’ll inevitably see issues arise in delivery performance.”

YRC Worldwide CEO Darren Hawkins, however, gave a more positive review of the spillover truckload freight. He said YRC Freight and the Holland operating units receive about 1,000 shipments per day from truckload carriers and that the exposure to the freight is growing. Nevertheless, tonnage per day fell 2.4 percent to 23,600 tons.

“That spot side of the business has been very positive for us. It fills empty lanes, it does the right things in our network and that business comes with very nice margin,” Hawkins said. “We are seeing the yield numbers on that truckload segment even exceed the LTL numbers in some cases. So, it's a good segment of business for us.”

Shippers will have to continue to seek out help from the LTL sector for the foreseeable future, given industry analysts believe the truckload capacity crunch will last into 2019. The LTL executives, though, warn shippers that they better be prepared to pay high spot rates and a few rejections before finding space to move your goods.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @ariashe_joc