Two New Studies provide insights into the LTL Freight Industry

Last week the Stifel Transportation & Logistics Research Group hosted a webinar event that featured two speakers from the Transportation Intermediaries Association, Mark Christos, TIA Board Member, Chair - 3PL Market Report and Robert Voltmann, President and CEO.  The two gentlemen presented some of the findings from their latest benchmarking report.  This data, supplied by a sample of TIA members, provides one indicator of how the transportation industry is performing.

The report looks at trends in truckload, intermodal and LTL shipping.  It also captures information on fuel related costs.  The current (first quarter 2013) report contained some interesting findings.

The percentage of transportation intermediaries offering LTL services has now increased to over 60 percent.  While LTL shipments represented 6 percent of TIA member revenues in 2010, this has gone up to 8 percent in 2012.  First quarter LTL revenues, among the TIA members reporting results, were up 6.5% year/year and compared to 4 percent increase for intermodal and 2.4 percent for truckload.  LTL profit margins were up 140 basis points year/year (1.4%) as compared to a 90 basis points drop for intermodal and a 70 basis points decline for over the road truckload.

LTL profit margins increased to 18.6 percent as compared to 10.0 percent for intermodal and 13.8 percent for truckload.  It was also interesting to note that small LTL players (e.g. less than $16 million in annual sales) experienced a 240 basis points increase in year/year profits while the very large LTL carriers (e.g. over $100 million in annual revenue) experienced a 200 basis points improvement.  The mid-size LTL carriers (e.g. $16 million to $100 million) suffered a 110 basis points decline in profit margins.  In one of their charts, one could see that the upward trend on LTL profit margins has been maintained since the fourth quarter of 2011. 

One of the TIA representatives noted that there are two developments that are creating a bit of an industry shakeout.  The new requirement for a freight broker to post a $75,000 surety bond is posing a challenge for some of the smaller players.  Anecdotal evidence seems to indicate that brokers moving less than 5 loads a day are finding the new environment most difficult to manage. 

The new Logistics Management Quest for Quality study paints a somewhat different picture of this sector.  Transportation service providers are rated on LM’s five key criteria: On-time Performance, Value, Information Technology, Customer Service, and Equipment & Operations.  The National LTL sector “now seems to have hit a bit of a leveling-off period in terms of growth. In fact, revenue has been fairly flat across the board due to some longer-haul LTL freight being siphoned off by truckload carriers at the heavy end and by parcel carriers being increasingly aggressive in the 70-pound to 500-pound range. . . This trying period for the sector has certainly helped shippers separate some of the stronger-performing carriers from the underachievers who are trying to compete with the best and win back that freight they may have lost to the TL and parcel players over the past few years.”

And while it’s been a tough road back for many LTLs . . . Logistics Management readers “have certainly been able to identity a group of long-haul carriers that have stood out among their peers in terms of overall service performance despite the mounting challenges.”  FedEx Freight posted the highest scores in most categories in the National and Multi-Regional Truckload market.  Con-Way finished second in the National LTL sector and Old Dominion came in second in the Multi-Region group.

“While revenue numbers have flattened a bit, the Regional LTL category continues to represent some of the most forward-thinking carriers in trucking. Competition is stiff, so every regional carrier is looking to get a step ahead by improving tracking technology and getting closer to shipper customers through more consultative customer service.”

New Penn came in first in the Northeast-Mid Atlantic region followed by Pitt-Ohio, Southeastern Freight Lines finished first in the South/South Central Region followed by Holland, Dayton Freight Lines came in first in the Midwest-North Central region followed by Holland again.  Peninsula Freight Lines beat out Lynden Motor lines for top spot in the Western region.

One can draw the following conclusions from the two studies.  Despite the slow growth in the economy, LTL carriers are maintaining pricing discipline.  This is helping them increase margins.  The LM Quest for Quality suggests that best in class LTL carriers are able to differentiate themselves on a range of key metrics. 

Trying to learn more about managing your freight carriers?  Looking for some tips on the key metrics you need to ensure your carriers deliver Best in Class performance.  Check out the “Carrier Performance Management: Metrics that Deliver Results” track at the 2013 Surface Transportation Summit (www.surfacetransportationsummit.com) on October 16.  The “Early Bird” registration fee discount expires on September 13.