Longer LTL transit times, pricing increases, and equipment manufacturing in 2022

Transcript

Longer Transit Times, Pricing Increases, and Equipment Manufacturing: LTL Shipping Projections for 2022

Looking at LTL transportation, there are a number of factors that will shape supply chains in the coming year. The LTL shipping market has been chaotic over the last couple of years due to increased freight volume, tighter capacities, labor and equipment shortages, and new pandemic safety protocols that have slowed efficiency. Many of these issues have shown no sign of slowing down, and the coming year is expected to see the LTL industry look to try and recover from some of the shortages that have created congestion and backups in major shipping hubs while attempting to expand shipping networks to accommodate the continued influx of freight demand.

 

High Demand, Continued Disruption 

The rise in e-commerce freight demand has hit the LTL industry hard. Supply chains for online distributors and retail sales have been stretched thin as customers do more and more shopping online. Due to precedents set by online retail giants like Amazon, expectations regarding shipping availability and speed have skyrocketed in the last five years. This increased demand and higher expectations, coupled with a pandemic that has severely reduced the available workforce and equipment, has led to carriers struggling to keep up operationally. One way carriers are dealing with the increased demand is by raising rates. General rate increases have been more frequent throughout 2021, and large carriers across the board are announcing additional GRIs of 4-8% to start the first quarter of 2022.

 

Omicron Work Absences and Covid-19 Mandates

The new Covid-19 variant, Omicron, has significantly impacted labor in the past few months. As the Omicron variant has swept through workforces across the country, compelling workers to quarantine for days or weeks while sick, the shipping industry has been once again forced to do more with less. Warehouse workers, dock workers, drivers, and logistics managers have all been hit hard by the pandemic, and companies have reported a higher level of absenteeism that is affecting active capacity and delays.

 

Labor, Truck Manufacturing, and Carrier Expansion 

There were already a variety of material and long-term challenges regarding labor amongst truck drivers in the shipping industry before the pandemic. The baby boomer retirement bubble, a low concentration of women filling driver jobs, and fewer prospective truck drivers overall have been problems for years in the industry, but the pandemic has accelerated them. However, despite 100,000 truck driver jobs being lost during the economic shutdown of 2020, there has been steady improvement up to the end of 2021. Carriers have been able to attract and retain more long-haul drivers with higher wages, more accommodating schedules, and better equipment, so the hiring trend should hopefully continue into 2022.

Equipment manufacturing, however, has continued to lag behind demand. Truck, trailer, and chassis manufacturing has not been able to meet the needs of carriers looking to expand their networks and get more trucks on the road to handle the steadily increasing demand for freight capacity. Unfortunately, some of the delays in manufacturing result from supply chain disruptions triggered by the very congestion new trucks and trailers may help alleviate. Regardless of delays, 2022 should see a major increase in manufacturing as carriers look to expand their networks and capacities for new freight.

 

Carrier Embargoes and Surcharges Aim to Eliminate Difficult Freight 

In addition to raising rates, many LTL carriers have employed strategic embargoes or restrictions on certain kinds of freight that do not fit efficiently into their network. Large carriers have employed restrictions on volume from certain customers to try and alleviate some of the congestion that was choking terminals and major shipping hubs. Some carriers have also imposed surcharges for oversized or “difficult” freight that may be hard to handle, takes up too much trailer space based on its dimensions, or is inconvenient to move or store in docks or terminals. Some carriers have simply rejected certain types of freight flat out. Until capacities loosen or demand ebbs, shippers can expect to pay a premium to ship anything and even more to move awkward or oversized freight.

Overall, 2022 will start out with many of the same problems that faced the LTL industry in 2020 and 2021. There will be capacity issues, labor shortages, high rates, and heavy demand. However, analysts expect to see some reprieve from these problems by the end of the year as vaccines and protocols slow pandemic absences, carriers hire more workers, freight networks expand, and new technologies are implemented. While adjustments and adaptations may arrive slowly, they are coming. Until then, shippers can benefit greatly from utilizing a 3PL like Koho to help you navigate the complicated and presently chaotic LTL shipping world to help you get the most from your LTL carriers and shipments.

Image of trucks lined up in a parking lot

Longer Transit Times, Pricing Increases, and Equipment Manufacturing: LTL Shipping Projections for 2022

Looking at LTL transportation, there are a number of factors that will shape supply chains in the coming year. The LTL shipping market has been chaotic over the last couple of years due to increased freight volume, tighter capacities, labor and equipment shortages, and new pandemic safety protocols that have slowed efficiency. Many of these issues have shown no sign of slowing down, and the coming year is expected to see the LTL industry look to try and recover from some of the shortages that have created congestion and backups in major shipping hubs while attempting to expand shipping networks to accommodate the continued influx of freight demand.

 

High Demand, Continued Disruption 

The rise in e-commerce freight demand has hit the LTL industry hard. Supply chains for online distributors and retail sales have been stretched thin as customers do more and more shopping online. Due to precedents set by online retail giants like Amazon, expectations regarding shipping availability and speed have skyrocketed in the last five years. This increased demand and higher expectations, coupled with a pandemic that has severely reduced the available workforce and equipment, has led to carriers struggling to keep up operationally. One way carriers are dealing with the increased demand is by raising rates. General rate increases have been more frequent throughout 2021, and large carriers across the board are announcing additional GRIs of 4-8% to start the first quarter of 2022.

 

Omicron Work Absences and Covid-19 Mandates

The new Covid-19 variant, Omicron, has significantly impacted labor in the past few months. As the Omicron variant has swept through workforces across the country, compelling workers to quarantine for days or weeks while sick, the shipping industry has been once again forced to do more with less. Warehouse workers, dock workers, drivers, and logistics managers have all been hit hard by the pandemic, and companies have reported a higher level of absenteeism that is affecting active capacity and delays.

 

Labor, Truck Manufacturing, and Carrier Expansion 

There were already a variety of material and long-term challenges regarding labor amongst truck drivers in the shipping industry before the pandemic. The baby boomer retirement bubble, a low concentration of women filling driver jobs, and fewer prospective truck drivers overall have been problems for years in the industry, but the pandemic has accelerated them. However, despite 100,000 truck driver jobs being lost during the economic shutdown of 2020, there has been steady improvement up to the end of 2021. Carriers have been able to attract and retain more long-haul drivers with higher wages, more accommodating schedules, and better equipment, so the hiring trend should hopefully continue into 2022.

Equipment manufacturing, however, has continued to lag behind demand. Truck, trailer, and chassis manufacturing has not been able to meet the needs of carriers looking to expand their networks and get more trucks on the road to handle the steadily increasing demand for freight capacity. Unfortunately, some of the delays in manufacturing result from supply chain disruptions triggered by the very congestion new trucks and trailers may help alleviate. Regardless of delays, 2022 should see a major increase in manufacturing as carriers look to expand their networks and capacities for new freight.

 

Carrier Embargoes and Surcharges Aim to Eliminate Difficult Freight 

In addition to raising rates, many LTL carriers have employed strategic embargoes or restrictions on certain kinds of freight that do not fit efficiently into their network. Large carriers have employed restrictions on volume from certain customers to try and alleviate some of the congestion that was choking terminals and major shipping hubs. Some carriers have also imposed surcharges for oversized or “difficult” freight that may be hard to handle, takes up too much trailer space based on its dimensions, or is inconvenient to move or store in docks or terminals. Some carriers have simply rejected certain types of freight flat out. Until capacities loosen or demand ebbs, shippers can expect to pay a premium to ship anything and even more to move awkward or oversized freight.

Overall, 2022 will start out with many of the same problems that faced the LTL industry in 2020 and 2021. There will be capacity issues, labor shortages, high rates, and heavy demand. However, analysts expect to see some reprieve from these problems by the end of the year as vaccines and protocols slow pandemic absences, carriers hire more workers, freight networks expand, and new technologies are implemented. While adjustments and adaptations may arrive slowly, they are coming. Until then, shippers can benefit greatly from utilizing a 3PL like Koho to help you navigate the complicated and presently chaotic LTL shipping world to help you get the most from your LTL carriers and shipments.

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