Less-than-truckload (LTL) freight shipping is an effective way for companies to cut costs and improve efficiency. This type of shipping refers to cargo loads that are not large enough to require an entire truck. Yet, at the same time, they are too large for parcel deliveries. LTL solutions allow these types of loads to share space with other LTL freights in an effort to optimize transit. This reduces the cost of shipping for those with LTL freights and makes better use of existing resources. As one might imagine, the e-commerce boom prior to and during the pandemic significantly increased demand for LTL freight transport. The industry is also expected to see a 7% growth over the next five years. However, it’s less clear if the profound growth the LTL freight industry has enjoyed recently will be sustained. Several factors will determine these future trends, and Fratogo outlines the major ones here.
Consumer Buying Trends
Based on recent data, it’s evident that e-commerce is here to stay. Consumers have become accustomed to ordering products online rather than going to brick-and-mortar stores. But more importantly, they have grown used to the convenience and speed of at-home delivery. Given that many e-commerce shipments fall into the LTL category, this is good news for the LTL freight industry. It would suggest staying power for this sector for the foreseeable future. However, there have been some declines in consumer buying as a result of inflationary pressures. This has resulted in some slowdown of e-commerce sales. Therefore, based on these various influences, growth of LTL freight transport is expected to continue but at a somewhat slower pace.
Fluctuating Capacity Issues
Despite some economic pressures, there is clear evidence that demand for LTL freight transport is increasing. However, these increases are not always sustained throughout the year, with peaks and troughs occurring. During periods of excess demand, the LTL freight industry has struggled with capacity issues. In other words, space for LTL freight on trucks becomes tight, which leads to higher rates and costs. While these periods allow for higher revenues for LTL freight carriers at times, they also signal lost business. It is therefore becoming increasingly important for LTL freight carriers to address these capacity problems through innovative solutions. Using 3PL/4PL freight carriers like Fratogo can help in this regard. Companies that effectively address these issues will be the ones to optimize their position in the LTL freight industry.
Technology Advances
Like most industries, the LTL freight industry is expected to be impacted by advancing technologies in the coming years. Some of these technologies are already being put into use with great success. Real-time tracking of LTL freight, predictive analytics, and the Internet-of-Things (IoT) are already being utilized by several carriers. And many carriers without these capabilities are turning to 3PL/4PL experts like Fratogo as partners. These technologies as well as artificial intelligence will continue to improve LTL freight transport for some time. Other technological advances affecting the LTL freight industry relate to automation. Self-driving trucks as well as electric and hybrid vehicles offer additional advantages. These can not only reduce costs but also improve energy efficiency while promoting better sustainability. Fratogo believes these will be the key areas in which the LTL freight industry will improve the most.
Industry Evolution in Consolidation
The final trend affecting the LTL freight industry as of late is one of carrier consolidation. In an effort to gain economies of scope and scale, larger LTL freight carriers have been acquiring smaller ones. This enables them to better serve their clients by expanding their North American footprint. It also allows them to optimize carrier loads by having a larger network of LTL freight transport overall. In all likelihood, these consolidation trends will persist in the near future until a few major players exist. Although it’s not clear how this might affect overall growth of the industry, it will undoubtedly bring about changes. As such, LTL freight transport carriers should be prepared and have a strategy in place. Appreciating these shifts in the sector along with the other major trends can help carriers be best prepared for what’s to come.