Running freight requires an integrated network of terminals, some of which depend on others to keep freight moving through the system. The mode involves picking up cargo locally, sorting it at a service center and transferring it via linear routes closer to the final destination, where it is re-sorted at another facility before final delivery to the customer. Parts of this process can be repeated multiple times for any shipment.

This effort also requires the coordination of drivers and dockers to meet delivery deadlines.

“Even in an ideal state, LTL is still a challenging industry,” said Curtis Garrett, senior vice president of the managed shipping provider. FreightPlus and founder and chief creative officer Understand LTL, told FreightWaves. “Using large, expensive equipment, haulers pick up, combine and move loads hundreds or thousands of miles, delivering them whole and doing it thousands of times a day.”

Point A to Point B, or linear moving, moving from one location to another on an LTL network is just one segment of the operation that has its challenges.

Many carriers outsource part of their scheduled transportation services to third parties—railroads, freight carrier partners, smaller independent carriers, or even single-party operators. This means that LTL carriers are often subject to fluctuations in broader TL and spot market trends. As demand increased and TL capacity declined throughout the pandemic, some carriers saw purchased transportation (PT) costs increase by more than 300 basis points as a percentage of revenue.

Publicly traded LTL carriers are using several quarters of record profits and cash flow to invest in line-haul operations, which include providing resources and hiring company drivers. The goal is to reduce PT’s expense line from a double-digit percentage of revenue to a range of just 2% to 3% of sales, similar to industry leader Old Dominion Freight Line (NASDAQ: ODFL).

It’s not just about reducing costs and avoiding future rate spikes. Carriers want more control over liner operations rather than relying on third-party carriers and railroads. Using our own drivers and equipment improves long-haul service schedules, delivery times and claim rates.

Photo: Old Dominion Central Dispatch Center (Credit: Curtis Garrett/Old Dominion)

The weather is also a problem.

In most LTL networks, half of the cargo is picked up and delivered within 30 minutes of the local terminal. The process is fine-tuned and sometimes easily broken even under normal conditions.

When parts of the system go down, services face various problems. This was seen recently when Hurricane Ian hit the southwest coast of Florida.

Ahead of the storm, carriers with terminals in southern Florida moved trucks and trailers to higher ground facilities located in the northern part of the state. The goal was to move equipment away from the storm’s crosshairs while keeping it close enough to quickly restore service to the affected terminals as soon as conditions permitted.

Line operations have also been adjusted to avoid affected areas. Most carriers have backups built into the network to compensate for potential service limitations when outages occur due to weather, labor issues, or other events. Carriers can bypass specific geographic regions when part of the network is down, minimizing cargo loss and service delays.

Then there are other areas of concern.

At the terminal level, a large number of skilled dock workers are needed and technology gaps with shippers need to be addressed to facilitate a cargo operation that meets shipping service standards.

Most customers also have idiosyncrasies, such as waiting for a specific appointment and delivery, requests for expedited transit, and shipping sensitivities, such as keeping certain shipments from freezing in the winter. The carriers that are most able to overcome these hurdles in liner shipping are the winners in the space.

“All of this means that LTL is a complex system that works, and by its very nature means that when you get it running successfully, there’s actually more redundancies, turns and flexibility. The network effect is part of what drives LTL carriers forward,” Garrett said.


More FreightWaves articles by Todd Maiden

October employment figures

The TOP 500 FREIGHTWAVES The list of hired carriers includes Old Dominion Freight Line (No. 9).

https://www.freightwaves.com/news/what-are-the-complexities-in-ltl-linehaul-transportation

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