How e-commerce is defining the future of LTL freight.
July 16, 2019
A demand for faster fulfillment and a rise in e-commerce has spurned a shift in the LTL freight landscape over the past decade. The impact has been significant, and LTL freight carriers will be adapting to these changes, so Freightquote by C.H. Robinson is looking to the future.
Considering that from 2017 to early 2019, e-commerce grew from around 11 percent of U.S. retail sales to near 17 percent, we see no reason to believe that growth will slow down while technology and shipping options are improving.
The e-commerce industry is the single most significant factor in reshaping LTL freight. With that in mind, we are going to take a look at the defining factors for the future of LTL freight and what you can expect to change in the coming years.
The importance of e-commerce.
Smaller shipments with a higher frequency stem from the e-commerce industry, and they are becoming more common. The increase in demand is pushing the LTL industry to redefine expectations.
Industry leaders are expanding their capabilities and offering expedited delivery, setting the tone for competitors who will have to match that, and do their best to improve on it. The pressure is on for shippers and retailers, who are redesigning their distribution models to deliver a useful service for customers.
Delivering expedited shipments directly to customer’s homes on demand is quite the undertaking for LTL shippers, but it’s what the market is demanding. Retailers are putting pressure on providers to offer added service levels with the hope that an even better delivery experience will attract new customers and keep them coming back.
Where e-commerce goes next can’t be predicted with absolute certainty, but the industry is going to continue to evolve. Let’s explore exactly what changes are on the way.
How the LTL freight industry will change.
Adapting existing business models to account for the rise of e-commerce will be critical for LTL providers. However, adapting to these changes will be costly for providers, and rates are guaranteed to rise. Here are three aspects that will carry the most weight.
More LTL carriers and logistics providers.
Demand is rising, and existing LTL providers will enhance operations to fill the void. More small carriers and third-party logistics providers will start popping up as well.
If e-commerce continues growing, LTL shipping will too, and any competent provider will help alleviate capacity challenges. There is still going to be a competitive aspect to consider, however. Any new providers who offer cheaper rates will impact the landscape of the industry.
Advanced technology will play a significant role.
The tracking sophistication of LTL has a reputation for being a step behind full truckload, with updates being few and far between. One way to differentiate from other providers as the landscape shifts is to take a leap in technology and leverage the resulting data.
Improved technology, data and tracking are beneficial to shippers, the end-recipient and carriers through the optimizing of pickup/delivery times and routing. Artificial intelligence is the next trend to watch, as it could even help determine which loading bay a carrier should request for optimal efficiency.
Rising operation costs.
Investing in new technology and improvements in LTL strategy as a whole will lead to a rise in operating costs. There will be a demand for not just existing services, but providing new offerings as well.
As an LTL shipper you can expect these changes to start rolling out over the coming years. Consider the demand for residential delivery, curbside delivery and other more intimate services that require time and fuel. These improvements will carry additional costs for you, as carriers add specialized services that demand more work hours and they start incorporating new equipment into their fleet.
What comes next for LTL freight?
The e-commerce industry is booming. Small and medium-sized businesses are responding by turning to LTL freight to move their products. While the industry adjusts, mitigating the impact it has on rates will require widespread effort by both carriers and customers.
Read our latest whitepaper “LTL Shipping: Looking at the Road Ahead” if you are interested in learning more about the future of LTL freight and what lies ahead for the industry. Or, contact us today if you want to start getting ahead of the coming changes.
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