LTL industry seeing strongest growth in nearly 10 years, C.H. Robinson chief says

The less-than-truckload (LTL) industry is experiencing its strongest growth in nearly a decade, with manufacturing and e-commerce activity pushing LTL carriers to deliver more small shipments moving in the last mile and in the "middle mile" between distribution centers, the chairman and CEO of broker and third-party logistics (3PL) provider giant C.H. Robinson Worldwide Inc. said today.

At the same time, LTL capacity remains tight because carriers have not added much equipment, John Wiehoff said in an interview with transport technology company SMC³, published in SMC³'s online newsletter. As is the case with the much larger truckload segment, an influx of tractors wouldn't make much difference today in LTL, because there aren't enough qualified drivers available, Wiehoff said.

LTL carriers have been less affected than their truckload brethren by the driver shortage, because LTL drivers are generally paid better and their shorter-haul runs allow for a better work-life balance, thus minimizing turnover. Still, LTL carriers are today feeling the pinch because the growth in other economic sectors that also hire drivers has resulted in LTL drivers leaving for more lucrative opportunities outside the industry, according to Wiehoff.

Demand for middle-mile transport services is likely to gain steam as more companies use multiple DCs to support less-linear omnichannel fulfillment and distribution models. A recent survey commissioned by asset-based 3PL Saddle Creek Logistics Services predicted that within two years, the number of companies using multiple DCs will more than double, to 49.4 percent from 23.5 percent. Another 28.4 percent will use multiple DCs, with each serving a specific geographic area or sales channel, according to the Saddle Creek survey. LTL carriers, with their regional network models, could be well positioned to capitalize on such a trend, if it materializes.

Wiehoff said the federal government's mandate that virtually all drivers and fleets equip their trucks with electronic logging devices (ELDs) is forcing a dramatic re-evaluation of what constitutes desirable freight and appropriate pricing. Because electronic logs require drivers to operate strictly within the federal hours-of-service requirements, shippers and consignees are under increasing pressure to be more organized and efficient in getting freight loaded and unloaded quickly, Wiehoff said.

Truckload capacity utilization is expected to stay in the mid-90-percent range through the first half of the year, Wiehoff said. However, it may moderate in the second half, should the strong truck sales already reported so far in 2018 lead to additional capacity entering the market, and should the supply chain adjust to the changes wrought by the ELD mandate, Wiehoff said.

In the past decade, most new trucks coming on line have replaced older equipment, not added to existing fleet sizes.

Wiehoff also sees LTL carriers focusing on improving their network profitability through more robust and precise data sets, analytics, and tools like dimensionalizers that are designed to accurately calculate a shipment's weight and dimensions, which in turn ensures that carriers are not underpricing their services. "LTL carriers are paying more attention to accepting the right freight in the right lanes at the right time," Wiehoff said. "More isn't absolutely better anymore."

Eden Prairie, Minn.-based Robinson, which is a non-asset-based provider, has long been associated with the truckload industry. Its truckload operations still generate the bulk of its revenue. Its LTL business, however, has been growing at a relatively rapid clip. LTL comprised about 20 percent of Robinson's total 2017 net revenue, which is revenue after the cost of purchased transportation. LTL net revenue grew by 6.6 percent year over year, while truckload net revenue fell 2.2 percent over that time.