LTL vs. Parcel 2019 Outlook: Why Shippers Are Increasingly Using BothPosted on February 19, 2019
By Adam Robinson
2019 Will See Carriers Expand LTL, Parcel, and Local Delivery
The outlook for LTL freight and parcel in 2019 shows some significant changes in the shipping industry. Across the board, carriers’ general rate increases are resulting in higher transportation spend for shippers of all sizes. To help manage costs and increase customer satisfaction, shippers are coming to the realization that the days of using either LTL or parcel exclusively are over. They are moving beyond a multi-carrier shipping strategy to a multi-modal strategy. In the age of eCommerce, the size of today's shipments can vary greatly; shippers need to understand where the market stands concerning LTL vs. parcel for 2019 and how the top trends affecting these modes will influence decision-making processes.
Continuing Rate Hikes
Major carriers announced general rate increases for 2019 averaging 4.9 percent. However, list rates have been increasing year-over-year, and the general rate increases serve as an average; they are not necessarily representative of actual costs, which increasingly include surcharges and accessorial fees.
Rate Increases Are Starting to Become More Frequent
General rate increases are not unexpected. But when coupled with increasingly frequent bumps to additional fees, which will likely be more prevalent as the driver shortage worsens and capacity tightens, shippers are faced with having to find new and innovative ways to offset these costs. Many are turning to invoice auditing, benchmarking, using analytics and outside experts to negotiate rates and surcharges, as well as looking at a wider range of carriers including LTL, parcel, and local carriers.
Shippers Continue to Waste Capacity Costing Them Profits
Trucks are empty up to 40 percent of the time, reports Michelle Fox of CNBC, and merely reducing wasted capacity could augment available space by 30 percent. Waste capacity is a target of many successful logistics management initiatives as capacity accounts, in part, for increases in general rates among parcel and LTL carriers, as well as new space-based and dimensional weight rating factors. Carriers have little-wasted space when shipments are packed or palletized with transportation costs in mind. Improper package stacking or failure to shrink-wrap parcels could result in freight damage and errors during transport, increasing fees while disappointing customers. The solution is simple: shippers should work to consolidate pallets and ensure they are taking advantage of all applicable services, including consolidating parcels into LTL freight where possible.
Carriers Are About to Abandon Deficit LTL Rating
LTL carriers have used deficit ratings to offer better costs for shippers, but the concept of deficit rating has negatively impacted profitability for carriers, according to Satish Jindel of DC Velocity. Shippers can expect the days of deficit rating will come to a close, resulting in higher freight rates. They should begin the process of consolidating shipments and working to create a multi-modal shipping strategy that will leverage both LTL and parcel bundled rating to secure the best rate possible.
LTL Carriers Are Expanding Last-Mile Delivery Options to Include Parcel-Like Services
To meet this demand, carriers are adjusting their business models. According to Mark Solomon at Freight Waves, an innovative way carriers are approaching the issue of less-than-truckload or parcel shipping is through the introduction of new last-mile residential delivery services that in days gone by would have been handled by parcel carriers. FedEx Freight is testing a last-mile delivery service in Dallas to determine the viability of converging LTL and parcel freight modes. As more carriers explore new ways to bring LTL and parcel services to consumers at a lower cost, the likelihood of new services will increase.
Rate increases will continue to occupy the thoughts of LTL and parcel shippers in 2019 as they struggle to secure capacity at affordable rates. With the uncertainty over the frequency of general rate increases, consideration of consolidation practices and knowing how to leverage both LTL and parcel freight services will help shippers overcome these obstacles and meet the demands of consumers. Ultimately, shippers need to understand the state of LTL and parcel freight to make informed decisions and provide a better level of customer service.
As shippers look to LTL and parcel carriers to handle their omnichannel delivery needs, having a multi-carrier shipping system that can help manage the dynamic parcel and LTL environment is more important than ever.