The 2:00 Minute Warning

In this week’s Two Minute Warning, we’re looking at the truckload market and sharing three things LTL shippers need to do right now.

This week I’m at the Stifel conference in Miami. One reason I enjoy attending this event is to have conversations with executives from large transportation companies and learn more about how they view the challenges in the transportation marketplace and how their strategic plans and decisions will address these challenges.

Additionally, there are some great presentations that help you understand what is really happening with shippers and carriers. For example, our friends Noel Perry and Avery Vise addressed the issue of the “Great Freight Recession” that has been going on for almost three years. Noel pointed out that what people are calling a recession is really just normal slow growth in the truckload sector. According to Noel, the reason it’s being referred to as a freight recession is that in 2021 and 2022, the markets were unusually robust. So anything after that looks like a decline and a recession.

Avery Vise pointed out that after 2021-2022, there was clearly too much capacity in the truckload marketplace which resulted in plummeting rates when demand cooled. Avery and Noel agreed that in 2025 contract rates will likely rise by somewhere in the area of 2-3%. Rates in the spot market will continue to rise if there is consolidation or more carriers close their doors. 

LTL industry updates

One of the other things we have gleaned from our conversations with various industry sources is that LTL shippers had better prepare for the changes in the freight classification system that will become effective in July, 2025. If you read these Two Minute Warnings you know that in January, we hosted a great webcast explaining the impact of these changes but some of the LTL carriers have told us they are a bit surprised at how few shippers are talking to them about how these changes could affect their freight costs.

With that thought in mind, as NMFC changes approach, we want to ensure that you’re informed, understand what is occurring, and look at the options you have to protect your costs.  

On March 3, the National Motor Freight Traffic Association (NMFTA) will be hosting an in–person meeting to discuss and potentially finalize the changes in the freight classification system. These changes will go in to effect in July, 2025. 

If you are interested in understanding how these changes will impact your company’s freight costs, here are three things that need to be done ASAP.

 
First, take a look at the list of items in Docket 2025-1 that are going to be considered for changes with the classification. If you ship items that are included in this list, then these items are considered to be “In Scope,” a.k.a. they are likely going to be changed and the number of “subcategories” for these item could be expanded from two to thirteen subcategories.

Don’t want to get too "inside baseball" on you, so let’s make this simple! Your company needs to know whether the products you ship with LTL carriers are considered to be “In Scope” or “Out of Scope.” No “ifs, ands, or buts about it” you need to know this information because it will help you understand the financial impact of these changes on your LTL costs.

Second, as you head in to negotiations with your LTL carriers, you need to determine if there is a record of the dimensions or density for products you ship, and whether your company can determine the average “Pounds per Cubic Foot” for the typical products you ship.  Since most shippers do not “dimensionalize" the size of the pallets/shipments being put on the LTL carriers' trailers, this could be challenging, but it is important information that can be very useful in your upcoming negotiations with your LTL carriers.

Third, since your LTL freight costs could be changing, review how your company allocates freight costs for prepaid shipments of your products, or in the freight quotes given to customers for “Prepaid & Add” shipments. Let’s cut right to the chase: your company could be losing margin/profitability on your sales if you do not take steps to manage around the uncertainty of LTL freight costs created by the changes in the NMFC.

If all of this seems a bit confusing, we have a much better recommendation. Just send me an email, or give us a call and ask to learn more about our LTL Strategic Assessment. It is a DYNAMITE tool and with one call, you can take care of all three of these items and protect your company’s profitability. So give us a call, send me an email or schedule a time to meet.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

CONNECT ON LINKEDIN

LET'S TALK! BOOK TIME WITH ME