Monday, May 04, 2009

If You're Squeamish on the LTL Sector, Don't Read This


The current economic downturn has been brutal on all the trucking industry, but especially the LTL sector. A $34.5 billion sector that has been flat for more than 10 years, it is being punished even further by trends toward consolidation by third-party logistics operators and truckload carriers seeking to expand their bases. Is this, indeed, the beginning of the end for LTL?


This is an exceptionally strong, well-written and well-researched story by a former colleague, John Gallagher, now with the Journal of Commerce.

In it, Gallagher examines the current downward trend in profit and volumes in the beleaguered LTL sector. After one finishes reading this, one realizes the LTL sector has more problems than merely overcapacity, sluggish rates and company-specific problems due to YRC Worldwide's heavy debt load.

What may indeed be happening is a secular shift away from the higher-cost, unionized operations of the LTL industry and toward the more nimble, lower-cost, non-union carriers of the $320 billion TL sector. And away from asset-based carriers altogether and toward third-party logistics companies, who by and large want nothing to do with the unionized parts of the trucking industry.

Some examples: leading 3PL C.H. Robinson, an $8.7 billion operation, is increasingly "swiping" loads away from the LTL sector and instead building and consolidating them toward much cheaper and more efficient truckload moves.

Truckload carriers themselves, with plenty of idle capacity right now, increasingly are moving "downstream" to build 5,000- and 10,000-pound shipments, hoping to consolidate with other small loads and hopefully able to turn a profit while doing all this for, say, $1.45 a mile. Full Story..........

No comments: