2019 Forecast for Less than Truckload

Dave Cox | Polaris Transportation Group

As shippers and transportation providers look ahead to the Less than Truckload (LTL) market in 2019, it is important to reflect on some of the key business shifts that occurred in the past 12 months to understand how the shipping environment is likely to present itself in 2019.

Golden Sikorka/Shutterstock.comIn 2018, the rate of change in the LTL business was considerably higher than in previous years. Newly deployed technologies reengineered the supply chain challenges tackled by talent and cross enterprise team work. Whether by working through capacity challenges, driver shortage, rate negotiations, mergers and acquisitions, global supply chain flexibility or scalability demands given the background of economic growth, technology teamwork and talent clearly led the way in 2018. Their lasting effects are the basis for our 2019 view.

We Begin with Customers

We view customers as continuing to demand more from their transportation providers in terms of quality and efficiency. Trade agreements, currency valuations, and a faster product lifecycle are putting increased pressure on shipper business models, and it is the LTL business which can play a leading role in the solution. Rapid customer adoption of artificial intelligence, Internet of Things (IoT) and blockchain match nicely with LTL rate and update connectivity. Service expectations converging courier and LTL together within a digitized environment lead us to hyper-connected interfaces which significantly reduces workflows for all stakeholders while improving the overall product.

Where information is more available and communicated in advance, LTL providers improve their coverage area by knowing more about where their assets are needed in advance, creating mutually beneficial efficiencies. Given these matters are of interest in most boardrooms, LTL service providers are uniquely positioned to take the lead in finding a better way.

Global supply chain demands are in a race to win business, generate more revenue and move more freight with accuracy, quality and at the best price possible. These data points are no longer held within secret vaults.

On the LTL carrier side, stock market investment analysts that cover the large publicly traded national and regional LTL carriers see the current pricing environment holding into Q1/Q2 in 2019. The wave of freight that was inducted into these networks in early 2018 as truckload capacity tightened continued to be reviewed and repriced where necessary.

Not to be overlooked are:

  • Rising borrowing costs, rising fuel prices
  • Rising driver wages and recruitment expenses
  • Rising staff costs to attract
  • Retain top talent and material technology investments

Structurally, the LTL market is becoming more expensive for carriers to maintain or improve on their market standing. For this reason, we see greater consolidation events to support these large networks. We also see an economic incentive for medium-size, quality LTL carriers who do not have to support large infrastructures as being an attractive alternative for shippers and 3PLs alike as they work through better ways to move freight together. We see smaller, quality, asset-light technology driven entrants as remarkably disruptive in this environment especially in certain geographic areas.

Technology Will Continue to Be the Wild Card in 2019

Global supply chain demands are in a race to win business, generate more revenue and move more freight with accuracy, quality and at the best price possible. These data points are no longer held within secret vaults. They are exposed with blockchain platforms, integrated systems, e-commerce, and electronic communications. As greater transparency (pricing and service) pivots the LTL market, the quality of the talent/technology to react to these system shocks will be of paramount importance. Technology is also going to reduce inefficiencies in the LTL network and increase the speed of order execution. The speed, integration and adoption of a host of solutions have the ability to un-level the playing field at a time when a better option is sought by so many.

The LTL mode is best positioned to lead customer engagement and creative problem solving by leveraging their vast networks, real estate and fleets. And frankly, they will need to because asset-light, technology-driven players are looking for ways to service customers in a more effective and efficient manner. Knowing the freight is no longer enough as 2018 taught us that much.

Dave Cox is President of Polaris Transportation Group, headquartered in Mississauga, ON. He may be reached at dave@polaristransport.com.