Less-than-truckload execution requires an integrated network of terminals, some of which are dependent on others to keep freight flowing through the system. The mode entails picking up freight locally, sorting it at a service center and transferring it via linehaul closer to its ultimate destination geography, where it is sorted again at another facility prior to its final delivery to the customer. Parts of this process can be repeated more than once for any given shipment.
The effort also requires the coordination of drivers and dockworkers to meet established delivery windows.
“Even in an ideal state, LTL is still a challenging industry,” Curtis Garrett, senior vice president at managed transportation provider FreightPlus and founder and chief creative at Understand LTL, told FreightWaves. “Using large, costly equipment, carriers are picking up, combining and moving freight hundreds or thousands of miles, delivering it intact and doing it thousands of times per day.”
The point A to point B, or linehaul, move from one location to another in an LTL network is just one segment of the operation and comes with its own challenges.
Many carriers outsource a portion of linehaul services to third parties — railroads, truckload carrier partners, smaller independent carriers or even single-party operators. This means LTL carriers are often subject to fluctuations in broader TL and spot market trends. As demand surged and TL capacity tightened throughout the pandemic, some carriers saw purchased transportation (PT) expenses increase by more than 300 basis points as a percentage of revenue.
The publicly traded LTL carriers are using multiple quarters of record profits and cash flow to make investments in linehaul operations, which include insourcing capacity and hiring company drivers. The goal is to lower the PT expense line from a double-digit percentage of revenue to a range of just 2% to 3% of sales like that of industry leader Old Dominion Freight Line (NASDAQ: ODFL).
It’s not just about lowering costs and avoiding future spikes in rates. Carriers want to have more control of linehaul operations versus relying on third-party carriers and the railroads. The use of in-house drivers and equipment improves long-haul service schedules, delivery times and claims ratios.
Weather also presents challenges.
In most LTL networks, half of the freight is picked up and delivered within 30 minutes of the local terminal. The process is finely tuned and sometimes easily disrupted even under normal conditions.
Services are challenged in numerous ways when parts of a system shut down. This was seen recently when Hurricane Ian made landfall on 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 reposition equipment away from the storm’s crosshairs while at the same time keeping it close enough to quickly resume operations at affected terminals once conditions permitted.
Linehaul operations were also tailored to avoid the impacted areas. Most carriers have redundancies built into the network to offset potential service constraints when outages happen whether due to weather, labor issues or other events. Carriers can route around certain geographies when part of the network goes down, minimizing lost shipments and service delays.
Then there are other areas of concern.
At the terminal level, ample skilled dockworker labor is a necessity and technology gaps with shippers must be solved to facilitate a linehaul operation capable of allowing delivery service standards to be met.
Most customers have idiosyncrasies as well, like specific appointment and delivery expectations, expedited transit requests and freight-specific sensitivities like keeping certain shipments from freezing in the winter. The carriers most capable of navigating these hurdles in linehaul operations are the winners in the space.
“All of this means that LTL is a complex system at work and by its very nature means that when you are successful at running it — there are actually more redundancies, pivots and flexibility available. The network effect is part of what powers LTL carriers forward,” Garrett said.
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