LTL capturing more load-board mind share; spot market posts double that of truckload, DAT says

An executive of one of the leading truck spot-market load boards said loads with the characteristics of less-than-truckload (LTL) shipments are populating its boards at twice the rate of truckload shipments, and today account for between 10 and 15 percent of posts on its boards.

Mark Montague, manager, industry pricing, for Portland, Ore.-based DAT Solutions, said loads such as partial truckload shipments and so-called hot shots, expedited traffic that moves for one customer, "are growing a lot on the load boards." Montague also said information DAT collects from property brokers shows LTL shipments are growing at a much faster clip than truckload traffic, though LTL accounts for a fraction of the much larger truckload industry's activity.

The data supports the growing evidence that the "LTL sector is something that a lot of brokers are very much into," Montague said yesterday on a panel session at the Transportation Intermediaries Association's (TIA) annual conference in Orlando.

Montague's comments support the view of the warming relationship between freight brokers and third-party logistics providers and the tight-knit LTL industry, where the top 10 carriers compose about 90 percent of the roughly $33 billion in total LTL annual revenue. While LTL carriers and third parties have always worked together, there has been a certain reluctance for the two sides to go all-in. Unlike a truckload shipment, which moves in linear fashion from one point to another, an LTL shipment involves multiple stops, multiple human touches, and dealing with often-complex tariffs and commodity classifications. Brokers familiar with the LTL space said its complexity means that brokers would have to settle for a $40 to $70 profit per load unless they could introduce adequate automation to drive down costs.

LTL carriers, meanwhile, have shied away from doing business with many transactional brokers, labeling them "bottom feeders" interested far more in shopping around for the lowest rate than in building relationships. In the past four years, LTL carriers have done a better job of managing their capacity, and have proved willing to either decline or shed freight they deem unprofitable. That renewed discipline, combined with a pickup in industrial demand and more bleed-off business from the capacity-crunched truckload segment, has put the asset-based players in control and forced brokers to be more on their toes.

Experts on a panel at TIA said that LTL carriers, helped in part by better technology to properly price their shipments, understand their costs far better than they did a decade ago. As a result, many carriers have moved away from a reliance on the "blanket" or "Freight All Kinds" pricing that has gotten many of them in financial trouble over the decades. LTL carriers "are more attuned to the world" than they've been in the past," said Jett McCandless, a board member of Shift Freight LLC, a Santa Fe Springs, Calif.-based LTL carrier that works exclusively with intermediaries. Perhaps with greater confidence comes a greater comfort level: LTL carriers have mostly overcome their historical bias toward brokers, Montague said.

Few brokers specialize in the LTL business, and starting an LTL brokerage from scratch is a difficult undertaking, experts said. The market is also somewhat concentrated. About seven brokers and 3PLs of different sizes control about $3 billion in annual revenue, according to data from consultancy CarrierDirect LLC.

Those who are in the sector or follow it said the potential is terrific. Not only is the LTL industry is growing organically, but LTL has provided an outlet for loads that might have moved by truckload if it weren't for tightening capacity. The decreased truckload availability has been brought on by the worsening shortage of commercial drivers. Montague of DAT said small to mid-size shippers are an especially fertile market for the brokerage community, as they may lack the volumes needed to get competitive LTL rates on their own.

Some of the big truckload intermediaries have noticed. At the end of 2014, Eden Prairie, Minn.-based C.H. Robinson Worldwide Inc., the 3PL and brokerage giant, bought Kansas City-based Freightquote.com with an eye toward capturing more share of the small to mid-size shipper market that would be inclined to use LTL. Last October, Chicago-based broker Coyote Logistics LLC, a fast-growing concern that was reported last month to be readying an IPO valued at about $2 billion, hired C. Thomas Barnes, the former head of Con-way Multimodal, to build an LTL business to augment Coyote's traditional truckload segment.

Andy Berke, vice president, strategic development of Riverview, Fla.-based BlueGrace Logistics, one of the LTL brokers, said there is a "ridiculous amount of freight out there" and not enough people or time to move it all efficiently. This puts brokers who understand the LTL space in a terrific position, Berke said. "The opportunities out there are surprisingly great," he said.