Analyst Insight: For shippers that rely on less-than-truckload (LTL) shipping, the market landscape has undergone some substantial changes that are still shaking out. 

The shutdown of LTL carrier Yellow in 2023 removed roughly 10% of capacity from the market. It forced many shippers to immediately find a new carrier or broker to keep their LTL freight moving, then try to find the right solution for 2024, as the footprint of LTL terminals nationwide radically changed for the first time in a decade. 

LTL shippers have also felt renewed cost pressures, in the form of increases in both rates and accessorial charges. Analysts forecast contract rates to go up another 3.6% to 5% in 2025.

To stay resilient, shippers should consider taking the following steps:

Rebid freight now. Shippers should be matched with LTL providers that deliver the right balance of service and price for their unique supply chains. Those that scrambled to secure LTL capacity after Yellow’s demise might not have had the luxury of finding the new provider or set of providers that’s right for them.

With LTL shipment volume still muted, now is a good time for shippers to review their options. A diversified portfolio of carriers is always a good idea, because not all freight holds the same appeal for every carrier. Freight that fits efficiently into a carrier’s network might be more attractive. Carriers looking for new freight might also be inclined to be more competitive on rates. Lastly, a portfolio of carriers can help guard against the capacity constraints that will occur when freight demand picks up.

Working with a third-party logistics provider that holds relationships with all the LTL carriers can help you find the right strategic mix.  

Manage growing accessorial fees. Pre-pandemic, one in 10 LTL shipments carried an accessorial fee for things like oversize freight, a liftgate for loading, or delivery to a congested metro area or residential neighborhood. Now, that has climbed to four out of every 10 shipments. 

Shippers can get a better handle on these fees with the right support. Accessorial fees can now be better predicted, using artificial intelligence and machine learning to analyze data about pick-up and drop-off locations. An LTL broker can use that data to identify carriers that can accommodate a shipper’s specific needs and incorporate the accessorials into a quote upfront to avoid surprises later.

Insights from the technology can allow carriers to plan routes more effectively, proactively inform drivers of special equipment or delivery needs, and avoid unexpected delays — which in turn avoids additional charges for things like a layover, temporary storage or redelivery. 

Prepare for classification changes. Changes to the National Motor Freight Classification (NMFC) system are slated to take effect in July and aim to simplify freight classes. The old system classified freight based on four key characteristics. The new system will rely primarily on density. 

This could mean already locked-in rates for LTL freight could go up or down. 

Outlook: To prepare for these changes, shippers should start by identifying which of their goods will be impacted. They’ll need to update their workflows and systems to ensure they can accurately identify shipment density and correctly classify their freight. Then, it’s important to review their pricing agreements in light of the changes. And shippers shouldn’t hesitate to reach out to their logistics partners for help. 

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