Guest Blog: Understanding the Metrics of LTL Capacity

As a purchaser of LTL shipping services, should you be worried about a capacity crunch in the LTL industry?  Capacity really has three distinct components, and any one of them could create a reduction in capacity. This can quickly lead to slower service, and then result in rate increases, as the more profitable shipments will gain preference over those moving at break-even or with low margins.

Equipment Availability

The first of the three variables is equipment availability – tractors and trailers.  This is the easiest of the three to remedy by carriers, as rental equipment is almost always available and can be used short-term to handle seasonal surges in traffic.  However, the operating costs will increase with leased equipment, and on-board computers will not be available in those units, causing a reduction in visibility of the real-time movement of your shipments.  An LTL carrier in good condition and prepared for the future will be happy to share the average age of the fleet, trade cycles and capital expenditures on equipment, currently and in the future.

Available Drivers

The second component: available drivers and dock associates are critical to maintain service levels and keep shipments moving on schedule.  The trucking industry is experiencing a driver shortage, and it is expected to become much more severe during the coming decade.  The truckload segment is the first to feel this shortage, as the long-haul, over the road drivers quickly burn out with the long hours and time away from home.  Many of the larger truckload carriers have no planned expansion to their fleets as they cannot keep sufficient drivers in the seats of their current fleet.  The turnover rates range from 70% to more than 100% per year.

LTL carriers have an advantage in this department, as the majority of drivers return home daily. The most successful LTL carriers have loyal and long-term associates bred by a culture of appreciation, great equipment, strong wages and a team environment.  These drivers tend to be the safest, the most productive and the most customer-friendly in the business. These companies frequently have in-house driver training programs to move associates with a proven record into a driving role.

Service Centers

The third and most challenging factor is available infrastructure, defined as the network of service centers.  These must be located in the correct locations and be large enough with sufficient dock doors.  In the LTL business, shipments move very quickly and trailers must be put to the dock on arrival for rapid unloading.  If a service center does not have enough dock doors, shipments will be slower to be cross-docked, close out times will be missed, dispatches will be late and your shipment will be delayed.  Sometimes a 30 minute delay along the way can cause a full day delay for your shipment.

The problem is that it takes a very long time to add service centers to an LTL network, as property needs to be secured that is in the right location, has the correct zoning (who wants a trucking terminal as a neighbor?) and has enough acreage to build a large service center.  This property can be virtually impossible to find in many major markets today.  The permitting and construction gestation period can take years to complete.  The carriers that are best prepared will have a complete service network with more than enough dock doors to move shipments on schedule.  These carriers will be making land purchases 5 to 10 years prior to the need just to be sure the property is available when needed.  The goal should be to never have “choke points” anywhere in the country where shipments could be delayed.  As a customer, you don’t want to hear excuses about backlogs of shipments caused by a service center structure that is not big enough to move every shipment in a timely manner.

As a customer, you should be asking all your carriers questions to validate their capacity, both today and in the future.  Look at the equipment as drivers come to your location to be sure it is new, clean and in good condition.  Walk inside an empty trailer or two and you will quickly see a difference in quality as equipment ages.  Talk to the drivers who pick up and deliver at your location and ask if they are happy with their employer and why.  Most of these drivers are not bashful and will share a story or two about their company.  When it comes to infrastructure, plan a visit to each carrier you are using in your city and judge for yourself.  If you just can’t get away or the carrier won’t extend an invitation, Google Maps will give you a good basis for comparison.

In the carrier selection process, don’t be seduced by the “discount game” but look for those carriers that are professional and prepared to handle your shipments both tomorrow and five or ten years from now.  Look for no “choke points”, a professional driver in a modern tractor with all the newest technology, and a service center that can move all shipments on-time.  That is what you are buying and that is what you and your customers deserve.

Many thanks to Scott Harrison at Southeastern Freight Lines for contributing this blog. Southeastern Freight Lines (SEFL) was named an Elite LTL Carrier by Trinity Logistics in 2013.