As supply chains open up, it’s easier to find carriers for LTL freight. But that doesn’t necessarily mean costs are coming down.
Unlike the supply shortages of certain goods caused by the pandemic, LTL shipping capacity was impacted by increased demand. There simply weren’t enough power units or trailers to go around. LTL carriers were forced to allocate capacity based on available drivers and equipment.
To make the smartest allocations, carriers more carefully evaluated which customers and lanes were most profitable. Now they have these insights and will be managing their resources with even more detail moving forward.
Ultimately, this is a good thing for the industry overall. A more systematic approach to pricing can also make it more predictable. This enables better planning and provisioning for both LTL carriers and shippers. The carriers are already skilled at this, as are large enterprise shippers. Now SMBs who primarily ship LTL freight will need to improve their logistics to get the same benefits.
The truth of this recently proved itself in the market. LTL shippers chasing the lowest costs had relied on carriers who positioned themselves as low-price providers. Those carriers were blind-sided by the sharp increase in costs when inflation spiked. Some of these carriers literally drove themselves out of business because they did not properly manage their profitability. That left LTL shippers who had simply gone for the lowest rates scrambling to find new capacity and managing a higher cost structure.
It’s reasonable to assume that many shippers suffered because they lacked the capabilities to shop rates or to know their own cost requirements for profitable operations. There are three things that LTL shippers can do to assure they have the capacity they need at the right price: implement a right-sized Transportation Management System (TMS) to simplify rate shopping and shipping management, partner with a third-party logistics (3PL) provider to access a wider network of carriers and perform routine audits to assure that rates and performance are optimized.
In today’s transportation market, a TMS is virtually a necessity. It doesn’t need to be an expensive one. The free versions of Beon™ Shipper or Beon™ LTL are perfect choices for most LTL shippers. You can use them to manage contracted carriers, access more carriers on the spot market and capture all the details of your LTL tracking and shipping.
In the event you find yourself jammed for time or resources, a relationship with a 3PL or freight brokerage can be a lifesaver. They have access to carriers or capacity that you might miss. In fact, some hold contracts for bulk capacity that you can share at rates considerably below market.
Moving LTL freight is an ever-changing cost center. In the same way carriers are constantly evaluating their profitability, shippers need to control their costs. This involves analytical tools and a bit of data integration which you or an outside consultant must provision. Here are some tips to help you get started. Whether you conduct it yourself or bring in a third-party, a rate and invoice audit can pay long term dividends.
As the LTL freight environment becomes increasingly optimized, shippers are going to need the right technology to profitably participate. The control, visibility and analysis of shipping costs that such tools enable can improve routine operations to boost LTL shippers’ bottom line.
That is the silver lining to the recent supply chain disruption.
