As we do every year at this time, we look forward to the year ahead and share with clients and readers what they’re likely to expect based on what we’re seeing within the transportation and logistics industry.
2020 certainly looked much different at the end of the year than it did at the start. The COVID-19 pandemic presented challenges worldwide and impacted most sectors of the global economy.
LTL shipping was already taxed before the pandemic with capacity issues and truck driver shortages. This time last year, we told customers to prepare for rate hikes in the wake of these issues. Then in March, the pandemic hit our shores and stressed what was already an overburdened industry.
The COVID Impact of 2020
The COVID-19-influenced LTL and Truckload freight market changed dramatically and at lightning speed, with multiple factors coinciding:
- Essential goods became the top shipment category, resulting in higher usage of big-box lanes
- Transport modes shifted across the board as more U.S., and foreign manufacturers sought to add domestic warehousing. Many were realizing the value of (and adopting) just-in-time inventory models. This, in turn, led to greater demand for LTL and truckload.
- Shipping costs rose as driver shortages led to tightened capacity despite employers’ more generous incentives. Many drivers opted for early retirement without enough new drivers to replace them, while others remained home to oversee remote learning of their school-aged children
- Also, positive COVID-19 tests for drivers resulted in terminals shutting down temporarily, causing capacity to tighten even further
- With more people at home, consumer spending increased (and continues to do so), particularly in retail and grocery categories
- It became essential for shippers to have a last-mile delivery strategy
What’s ahead in 2021?
Beginning in mid-2020, we saw freight volume start recovering. We anticipate that to continue through 2021 as an upsurge in production brings more goods to market. Unfortunately, we will likely see the fluctuating 2-3x higher LTL rates shippers have been contending with for the last several months continue due in large part to:
- A less than truckload (LTL) crunch occurring due to high demand and low capacity, with smaller operators opting not to add more capacity to their fleets
- An expected surge in truckload (TL) spot prices (although TL volume issues somewhat balanced by intermodal volumes)
- Regulatory issues between the U.S. and China continuing to play out, post-election
- The potential impact of consumer expectations on availability and shipping costs
Budgeting for LTL
For smaller shippers especially, LTL will still likely remain the most affordable option even despite rate increases. LTL typically offers greater predictability and better rates than parcel or truckload, depending on the shipment size.
Still, LTL will see rate increases carrying over from Q4 2020. Higher-density, more-desirable freight could cost 5-8% more to ship. Less-desirable/bulky/large freight could see as much as a 5-10% increase to compensate for its lower volume.
For the foreseeable future, transportation costs will likely increase, and spot rates will continue rising. We recommend shippers:
- Understand that a carrier could reject larger/bulkier freight as they attempt to regain balance during this time of tighter capacity
- Be transparent with customers regarding potential adjustments to timeframes due to pickup/delivery delays caused by decreased capacity; time-sensitive shipments can be sent priority or expedited
- Show additional courtesy to carriers, sticking to agreed-upon schedules
- Pay freight bills promptly
Partnering with a 3PL like Amware in 2021 will save you money on your LTL shipping. By utilizing our cloud-based transportation management system (TMS), Amrate, LTL shippers can obtain competitive rates from over 400 carriers, including every major carrier in the U.S.
Contact us today and discover how we’re helping LTL clients navigate these unpredictable times while continuing to save them 30% or more annually. Click below to request a free trial of Amrate and start comparing LTL rates today.