Summary
Gone are the "good old days" of high-margin LTL (less than truckload) freight transportation. At its burial, many now laid-off union members, disheartened officials of union benefit and pension funds, once successful LTL executives, and many former vendors to the once-prosperous industry kindly paid their respects, then gathered together over cocktails and worried about their own futures.
Analysis
We can and should blame it all, or credit it to, the economic realities and to the basics of competition.
For example: Truckload (TL) carriers fast realized they could "undercut" LTL's fat rates by loading certain multiple LTL shipments into one trailer, then fast delivering that one trailer to a cross-docking facility nearby the destination of the many LTL shipments there involved, after which a local delivery or other LTL carrier would take the final-mile delivery assignments. As a result, the original LTL carrier lost its margin-loaded LTL rates for most of the transport miles, and also suffered hurtful loss to its network densities.
Next, for decades LTL rate schedules and proffered discounts have been no less than a laughing matter; while non-union LTL carriers fought head-to-head with unionized carriers' higher cost structures, and shippers wisely cared not a 'twit about the organizational status of that trucker who picked up or delivered the freight.
At least one very big North American LTL carrier (YRCW) now suffers financial and operational problems exceeded by only those of the United Stated Postal Service, yet another organization the continued existence of which we all should question.
When, not if, YRCW finally falls, for the moment at least the LTL market will shortly return to equilibrium of supply and demand. But for how long shall that happy equilibrium remain in place? Certain of us believe, deep in our hearts, that such a "broken model" cannot continue for too much longer.
For example: Truckload (TL) carriers fast realized they could "undercut" LTL's fat rates by loading certain multiple LTL shipments into one trailer, then fast delivering that one trailer to a cross-docking facility nearby the destination of the many LTL shipments there involved, after which a local delivery or other LTL carrier would take the final-mile delivery assignments. As a result, the original LTL carrier lost its margin-loaded LTL rates for most of the transport miles, and also suffered hurtful loss to its network densities.
Next, for decades LTL rate schedules and proffered discounts have been no less than a laughing matter; while non-union LTL carriers fought head-to-head with unionized carriers' higher cost structures, and shippers wisely cared not a 'twit about the organizational status of that trucker who picked up or delivered the freight.
At least one very big North American LTL carrier (YRCW) now suffers financial and operational problems exceeded by only those of the United Stated Postal Service, yet another organization the continued existence of which we all should question.
When, not if, YRCW finally falls, for the moment at least the LTL market will shortly return to equilibrium of supply and demand. But for how long shall that happy equilibrium remain in place? Certain of us believe, deep in our hearts, that such a "broken model" cannot continue for too much longer.
Thom Williams consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
