One year back, less-than-truckload (LTL) freight transportation was in a tailspin. The pandemic had triggered a lockdown. The economy was cratering. Orders were summarily cancelled. Shippers, wholesalers and merchants were desperately trying to survive, and carriers were caught up in the downward spiral.

And now? With the economy in recovery mode and delivery patterns shifting away from full truckloads, many LTL freight carriers enjoy booming business and have recently raised prices. Their biggest problem is trying to figure out how to move all the freight being thrown their way.

Self-driving truck startup, Plus, agreed to merge with SPAC, Hennessy Capital Investment Corp. V.
Self-driving truck startup, Plus, agreed to merge with SPAC, Hennessy Capital Investment Corp. V.

Famine to Feast

“Everybody is a winner — national, regional, final mile. They’re all in a position of strong pricing power due to the capacity situation,” said Brian Thompson, chief commercial officer at the technology provider SMC3. “They went from famine to feast.”

SMC3 specializes in assisting LTL shippers and carriers with efficiency-related software and technology tools that help optimize the entire LTL-related supply chain. It’s in a unique position to observe the marketplace. More than 5,000 shippers, carriers, logistics service providers and freight-payment companies use its services.

While some of these gains may be temporary, LTL-related business has changed in two fundamental ways. For one, LTL carriers have been forced to engage more in last-mile delivery. Second, a heightened number of logistics carriers have turned to LTL carriers to provide necessary services.

Both developments should have staying power.

“Just like LTL carriers that have pulled into Final Mile, whether they like it or not, logistics providers and freight brokers have been pulled into LTL to service their customers,” said Thompson in a Zoom call.

LTL business accounts for about 12-14% of total trucking freight in the US by value, according to various estimates. Almost by definition, LTL is a lot more complicated than line-haul or full truckload, as each truck carries multiple orders to multiple destinations. It involves more handling, more stops and generally more planning. That all translates into more money spent in investments.

“LTL is a capital intensive mode of transportation with a high amount of overhead,” said Thompson. “So, they’re really sensitive to volume changes up or down.”

Publicly traded truck transport companies help tell the story of a renewal of fortune. Old Dominion Freight, for example, is one of the largest LTL carriers in the US. Its first quarter 2021 financial results are illustrative. LTL revenue grew that quarter about 14% to $1.1 billion. Net income, or profit, however, jumped almost 50% to a shade under $200 million. This came after a down year in 2020, where revenues dropped by 2.3%.

Another publicly traded company is SAIA. In a first quarter earnings call, CEO and president Frederick Holzgrefe said that SAIA in January implemented a general rate increase of 5.9%. Contracts renewed in the quarter carried with them an…

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