Riverside Logistics

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Why is my Less Than Truckload (LTL) freight pricing going up and my service level going down?

As it stands right now, the LTL (Less-than-Truckload) market is best described as “STRESSED”. This is probably an understatement. All carriers, regional and nation-wide, are saying the same thing. It’s a tough environment out there. Terminals are over-loaded, service levels have deteriorated, embargoes are in place in select markets and pricing is under extreme pressure.

The first question should be “how did we get here”? In one word = PANDEMIC. Carriers anticipated that volumes would dry up due to the pandemic lockdowns. They furloughed and retired staff and drivers only to be left without enough help when the volumes not only returned but increased from pre-pandemic levels.

Now as we fast-forward to today, we are seeing multiple carriers, especially the nationals, shutting down flows into and out of specific terminals to reduce terminal congestion from excess supply. These “embargoes” are causing further stresses to the system. As one carrier shuts off capacity, another gets overloaded, and on and on and on. It’s a domino type effect that is not dissipating quickly.

So, let’s turn to service levels. They are lower, in some cases much lower. Your freight is sitting in the pipeline longer and delaying delivery to your customer. You identify the problem, push for better delivery, but it back-fires on you by causing more delays. The driver shortage is making it very tough for carriers to get the job done.

Finally, the pricing is going up. If you have contracts in place good for you. If you don’t, we would suggest you either get them in place or deal with a 3PL who has solid contractual commitments that won’t rise with the tide.

It’s not all doom and gloom. Carriers are slowly recovering, and capacities are adjusting to volumes. As supply improves, demand subsides, and capacity levels out, the service, pricing and overall market conditions will improve. How fast? Not fast enough. I would anticipate the network balancing in late 2021 or early 2022. Until then, make sure you align with the right partners who can help steer you successfully through this current environment.

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Capacity Load Freight: More Prevalent and More Expensive

LTL carriers are experiencing a significant increase in large shipments, due in part to tight capacity in the US truckload (TL) and less-than-truckload (LTL) markets. While capacity freight currently applies to a smaller percentage of shipments, that number is growing steadily.

Please be aware of the general capacity load rules and charges that (may) apply to larger shipments.

Capacity loads apply when the quantity of freight, in the manner loaded, utilizes a linear length of between 8ft and 15 ft. Some carriers also have weight limits that trigger capacity loads. The weight limits range anywhere from 8,000 to 15,000 lbs.

The linear length is determined by assuming that handling units will be loaded side-by-side when the dimensions allow. So, if you ship 48 square or 48 x 40 inch pallets then 8 pallets will hit 16 ft. You might argue that if you specify that the freight is stackable, one on top of the other, then you could have more than 8 pallets and still not trigger a capacity load situation. Don’t bet on that!! Most LTL carriers consider the entire load as floor stacked when calculating the linear footage. The point is, be careful. Another scenario is if your pallets are “turnable”, meaning they can be turned so the length is shorter. In this case, if you have 8 pallets that are 40 x 48 and are turnable, then, in theory, the length would be 4 times 40” or 13.33 ft rather than 4 x 48” or 16 liner ft. Although this can make a difference in how pricing applies, be careful. Make sure that you understand how the particular carriers’ rules tariff applies to linear feet.

So, what to do?

One suggestion is to have a 3PL handle the move. There are two strategic advantages  to do this.

  1. 3PL’s are well versed about the rules and how they apply.
  2. They will quote you a price that applies, even if they have mis-calculated

Many 3PL’s have negotiated higher linear foot rules with their carriers and this allows them to get more competitive pricing on larger loads. If you are a “cubic” shipper, one who ships pallets loads that don’t necessarily weigh a lot but take up a lot of “cubic” feet, then using a 3PL with higher linear foot rates could really help you.

Capacity Rules and Linear Feet can make freight costs go up significantly, potentially causing a shipment to cost more than it’s worth. Using a 3PL on large LTL shipments allows you to take advantage of the 3PL’s basket of carriers and competitive price structure without risking unpleasant freight costs.

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What is Expedited Freight, and Who Uses it?

Expedited freight services are utilized by shippers to deliver goods to the customer on a specific date and sometimes at a specific time of day. Overall standard, non-expedited, transportation services have delivery accuracy rates that can range from a high of 98% to less than 50% on-time.  This fluctuates based on overall industry capacity and individual carrier management.

The most common mode for expedited freight to move is by air. Freight is picked up and delivered by truck but ends up travelling most of the distance by plane. If possible, expedited freight can be driven in various types of equipment. Of course, the shipment must cross a drivable distance within your timeframe, so sending freight this way only makes sense for short distances (usually less than 500 miles).

The challenge with sending expedited freight by air charter or road is that it is more expensive than standard freight.  Premiums can range anywhere from a 20% to 3 or 4 times the amount normally paid for a standard transit shipment.  Shippers use this method only when it is necessary to maintain customer commitments.

There are six major industries that frequently utilize expedited freight companies for a variety of reasons.

  1. Medical Industry – Used when valuable devices cannot sit in the back of a freight vehicle for long periods of time.
  2. Pharmaceutical Industry – Advantageous for  patients who rely on their medications for survival allowing them to receive  them immediately.
  3. Manufacturing Industry – Meeting deadlines is often a challenge. If parts do not come in on time, projects can get delayed or whole operations can be shut down.  Depending on the size of the operation those costs usually outweigh the cost of the expedited freight.
  4. E-commerce Industry – Retail stores are growing tremendously, and many of them offer their products online. Several big retailers also offer fast shipping options, including two days, overnight, or even same day delivery.
  5. Seasonal – This industry sells most of its products once a year in holiday-themed pop-up stores. With the help of an expedited shipping provider, business should not be running out of stock when customers are buying the most, which helps cut down on inventory costs.
  6. Perishable high value food – For expensive high value food products like Ahi Tuna, getting product across the world in hours instead of days ensures the food can be consumed within hours of receipt.

Expedited freight is used to make sure cargo gets to its location as soon as possible. It is important to consider the increased cost of expedited freight with the cost of not having the product at your location when it is needed.  If you need this type of service reach out to us.  Riverside Logistics can help match your needs with the best value expedited service.

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