Less than Truckload (LTL) Outlook 2020: Full recovery on the horizon?

A combination of an improving industrial economy, with manufacturers rebuilding lower inventory levels, has top executives from the $44 billion less-than-truckload (LTL) market crossing their fingers in hopes of a financial rebound this year.

Indeed, after more than 14 straight months of declining tonnage in the industrial portion of the economy, LTL carriers are hoping for recovery in that sector as international trade worries and overall geopolitical concerns lessen.

“Consumers have done very well in retail, but the industrial side of the economy has not moved as quickly,” says Darren Hawkins, president and CEO of YRC Worldwide. “We rate the manufacturing index as an important leading economic indicator, and with our exposure to industrial, we have a high correlation to that portion of the economy. The lion’s share is on the industrial side, and things have settled down in that area and are moving steadily in the right direction.”

Even better news for LTL carriers is their newfound pricing discipline. Even with the sudden closure last February of New England Motor Freight (NEMF), which ranked as the 20th-largest LTL carrier with $345 million in revenue, the industry absorbed that capacity without resorting to predatory pricing in order to obtain that NEMF freight.

In fact, there’s nothing in the air to signal an LTL price war, especially as carriers continue to enjoy the benefits of a concentrated market. The Top 10 LTL carriers control about 73% market share, according to data from consultancy ShipMatrix, and the Top 25 absorb about 90% of the LTL market.

Analysts say that the LTL market is dominated by three very strong, non-union companies: FedEx Freight, Old Dominion and XPO Logistics. All are formidable competitors to Teamsters-covered YRC Freight and its three regional subsidiaries as well as ABF Freight System, among others. “In addition to being non-union, well-run companies, the top three all have highly developed and sophisticated information technology systems that allow them the information to provide better service at a lower cost,” said Donald Broughton, principal of Broughton Consulting.

But an analysis by Logistics Management shows that even the best-run LTL carriers face operational hurdles these days. All are continually competing for fewer qualified drivers who are demanding higher pay. Costs for equipment and insurance are soaring. And the economy, while good, has been growing at an uneven pace, causing unforeseen spikes and dips in demand.

Let’s examine how the best LTL fleets are coping with this ever-changing economic model, and why they’re hoping 2020 is a year of economic recovery for them.

https://www.logisticsmgmt.com/article/less_than_truckload_ltl_outlook_2020_full_recovery_on_the_horizon/transportation