LTL business is facing a radical transformation
September 1, 2022
The year so far has been busy with acquisitions and realignments in the less-than-truckload industry. Some undercurrents seem to be pulling the LTL industry in a new direction.
Here is a rundown of some of what’s been going on:
- Recently, Saia LTL Freight continued its extensive expansion plans by opening a terminal near Chicago’s O’Hare airport.
- Heartland Express, Hirschbach Motors, KLLM Transport and Schneider National all have announced acquisitions.
- USA Truck and Freymiller have been targeted for acquisitions.
- Yellow Corp. has been following through a brand consolidation announced late last year.
- FedEx Ground is dealing with dissension among its contractors, who want more of the giant profits the company has been collecting.
Together, these strategic business machinations suggest a fundamental change for less-than-truckload shipping.
The LTL industry is going through a “radical transformation,” is how one market analyst put it.
Donald Broughton, principal and managing partner in transportation analysis firm Broughton Capital LLC, Clayton, Mo., keeps close tabs on the LTL industry.
The radical transformation he sees is being caused by two fundamental changes.
One, the customer base for LTL business is changing.
“It used to have an industrial customer base that was focused more on price and only needed service between industrial or commercial addresses,” Broughton said.
That is changing because of “onshoring,” which is the opposite of offshoring and refers to moving business operations from overseas back to a company’s home.
Bloomberg News has noted that the related buzzwords “onshoring,” “reshoring” and “nearshoring” have been mentioned a lot during earnings calls early this year. The all point to “a major re-assessment of supply chains in the wake of port bottlenecks, parts shortages and skyrocketing shipping costs that have wreaked havoc on corporate budgets in the U.S. and across the globe,” Bloomberg reported in July.
“The onshoring trend is real, and as it continues the volume of industrial LTL will grow at a pace that is two times to five times what it normally would be,” Broughton said.
The reason is that all the parts and pieces going into the production or assembly process need to be moved, not just the finished product, Broughton said.
The second of the one-two punches
The other fundamental change disrupting the LTL industry, Broughton said, is the rise of e-commerce.
The increasing e-commerce sales of products is exploding the delivery networks of UPS and FedEx, he said.
“This will become a larger customer base than the old industrial base, but it requires delivery to residential addresses,” Broughton said.
Logistics Management noted much the same in a July article.
“The $83 billion less-than truckload sector is booming, thanks to demand from the active e-commerce sector, better pricing strategies and an effective lid on capacity because of expenses associated with building costly hub-and-spoke networks,” Logistics Management published. LL
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