Analyst Insight: Lower freight volumes in 2023 resulted in an abundance of capacity and lower rates. While the less-than-truckload (LTL) market is expected to remain soft throughout the first part of 2024, freight volumes will eventually increase and capacity constraints will emerge. Shippers should diversify their carrier base to prepare for when capacity tightens, to help keep their supply chains running smoothly.  

The LTL market went through a significant realignment at the end of 2023 as Yellow Corp., the third-largest U.S. LTL carrier, ceased operations, leaving shippers scrambling to find capacity. Fortunately, because of a soft market, capacity was available, and carriers were able to step in to transport stranded loads. Looking ahead, if the economy improves — as many analysts predict — freight volumes will increase and capacity will tighten, leaving many shippers in a difficult position.

Shippers should diversify their carrier base to prepare for when capacity tightens, and to help establish a more resilient supply chain. Building and maintaining strong relationships with carriers is crucial, so incorporating new carriers into a regular use cadence is key. That way, when freight volumes increase or disruptions arise, your well-rounded carrier network will allow you to adapt with agility, because your established relationships and necessary system integrations will already be in place.

Not all carriers are the same, however, so selecting the right carrier partner is critical. There’s more to consider than just cost and the size of their network. Here are four factors to consider that will have a significant impact on your business:

Specialization. Besides just looking for a broad service network, partner with carriers that offer specialized services or are strong in specific lanes or regions that align with your unique goods and shipping needs.

Transit time. Speed and predictability are pivotal to today’s supply chain. Carriers that allow for direct shipments without stopping at multiple breakbulk terminals on the way to a destination result in faster, more consistent transit times, while minimizing opportunities for delays and product damage.

Claims rate. Claims negatively impact all parties involved. They reduce the carrier’s profitability, put strain on the shipper’s inventory and upset customers because they don’t receive their goods intact and on time. Partnering with a carrier with a low claims rate helps avoid this operational and financial nightmare.

Customer service. While transportation and logistics has become increasingly automated, the human component cannot be ignored. Carriers that provide consistent account teams — especially those with local terminals that don’t simply use overseas call centers — who understand a shipper’s business and can be reached quickly help keep operations running smoothly and address disruptions when they arise.

Debt-free status. Stability matters in the transportation industry. Look for carriers with good business practices, that are financially stable (such as being debt-free and owning their own equipment), and are positioned to provide consistent, quality service even in tough times. 

Outlook: While the LTL market has been soft, it will eventually shift. If the economy plays out favorably, freight volumes will increase, and capacity constraints will emerge. That could put pressure on companies, similar to what we saw in 2022 when shippers scrambled to find available truck space. Shippers should proactively partner with carriers that provide the fast and quality service and lane coverage they need to be ready when the market changes. 

Resource Link:

www.herculesfreight.com