Sourcing LTL freight soon? Here's some advice.
Jun 17, 2020
As transportation sourcing experts, we've gleaned a wealth of expertise and experience from having conducted billions of dollars in sourcing events on behalf of our customers. That is why it has been interesting to observe how the COVID-19 crisis is affecting the freight markets.
Under “normal” circumstances the economic conditions would have a comparable impact on North American motor carriers. But let’s face it, these are not “normal” circumstances. The LTL market continues to impress.
While the truckload market is hurting from the downturn in demand, the parcel market is surging, and the the LTL market has managed to improve their operating ratios even amidst a drop in shipments.
A recent article in Logistics Management pointed out that “despite a 4.1% drop in shipments per day, the LTL carriers actually improved their collective operating ratios by 2.1% in the first quarter […] This group of carriers includes Old Dominion Freight Line, YRC Freight, Arkansas Best and others.” LTL carriers are on top of their game when it comes to managing their market.
With that thought in mind, if your company is planning on working with your LTL carriers and conducting an LTL Sourcing/RFP event in the foreseeable future, it is more important than ever before to make sure your sourcing strategies address the realities of today’s LTL environment. In particular, here are three things shippers need to consider before they launch their RFPs:
First, understand that the carriers have great data—much better data than even two or three years ago. With ELDs the carriers know the amount of time they spend at your docks or the docks of your customers and suppliers. And with dimensionalizers they know how much space your freight consumes on their trailers. How good is this information? Well, as Darren Hawkins, CEO of YRC Worldwide, commented in an interview, with ELD’s the carriers now measure in minutes and with dimensionalizers they can measure in inches!
Second, since they have great data, the carriers know where they want to run their trucks. One of the things that never ceases to surprise us is how often shippers overlook whether their LTL freight is a good “match” for their carriers. That is why we encourage folks to listen to this interview with the CEO of Estes Express, Rob Estes where he explains why things like lane density are so important to LTL carriers and how it affects their rate structures.
Third, when companies decide to conduct a sourcing event, we always recommend that they include their incumbent carriers, but it is also important to look at how their networks may have changed over the past couple of years. In line with Rob Estes’ thoughts, their networks may have changed and affected which lanes are desirable or undesirable. That is why we recommend selectively adding new carriers that have a good network based on where your company's freight requirements are located. If you have questions about carrier networks, give us a call. We’d be happy to share information that can result in a more effective sourcing event.
If you have other questions about sourcing LTL freight or could use help, we encourage you to get in touch. Despite the current challenges, we’ve been generating incredible savings for shippers and getting positive feedback from carriers who value the benefits of a strategic sourcing event.