LTL Market Conditions & The Capacity Crunch
The capacity crunch in the U.S. trucking industry is here and it is very real. Analysts are reporting that annual rate increases levied to shippers by the LTL carriers in the open market this year are sticking. The tight capacity constraints are a result of numerous factors including a severe driver shortage, new hours of service regulations imposed by government regulation, a harsh winter that caused delays in the movement of previously scheduled to move freight, and even shortages of diesel and heavy equipment mechanics on hand to maintain and keep carrier fleets on the road.
Add all of that to the fact that the U.S economy has shown some life – even if minimal - with regards to turning around, and you have what has set the stage for the proverbial perfect storm that is changing the tides in favor of carriers instead of shippers for the first time in several years. The capacity crunch in the truckload segment of the market is also spilling over into the LTL sector, and shippers who aren’t strategically aligned with a transportation partner providing guaranteed capacity need to be very aware of what is happening right now.
This tightening is allowing carriers to shift their focus from vying for freight through ridiculously low pricing models in favor of shippers, to carriers now focusing on hauling good, dense, profitable freight and increasing their yields. Many industry experts are predicting that we will see another carrier general rate increase passed on to shippers in the open market in 2014. This will most likely be carried out sometime at the end of Q2 or after, but nonetheless carriers just imposed a round of increases onto shippers within the past month.
Shippers who aren’t aware of their surroundings may soon be in for a rude awakening with rising prices, longer than usual transit times, and maybe even not having their freight picked up at all in some instances. Shippers have reaped the benefits of leverage over carriers in recent years, but this is about to change completely. The shift has already started.
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