2020 was an interesting year to say the least. The COVID-19 pandemic had a drastic effect on the global economy, hindering many industries – including transportation. With the online shopping boom and the increased need for delivery, the shipping industry was in demand. But it also had its share of challenges. The increased demand caused shipping delays, there was a driver shortage, delivery issues because of facilities being closed or limiting hours, and illness shutting down terminals or affecting companies in other ways. The less-than-truckload (LTL) industry now has to take the lessons learned in 2020 and prepare to move forward in 2021 and beyond. Here are a few things to look for in LTL logistics in 2021.
Industry experts expect the trends experienced in the third and fourth quarter of 2020 to extend into 2021 as we all continue dealing with the pandemic and the vaccine rollout. Additionally, Americans are expected to continue shopping online even after the COVID-19 crisis wanes because convenience is key for many busy Americans. So, what does this all mean for the less-than-truckload industry?
Industry analysts expect LTL volume to increase 3-5% in 2021 while truckload will grow 8-10%. Part of the LTL growth is expected to be because of smaller final mile and e-commerce shipping. Additionally, after a slow year due to the pandemic, goods production is looking to recover in 2021, meaning there will be more products that need to get to market. LTL carriers will be expected to handle this demand. However, if another economic shutdown occurs, we will see a drop in volume just like we did at the beginning of the pandemic.
The surge in capacity means more drivers are needed. However, carriers are unable to meet the demand for many reasons. According to Paul Kroes, market insights leader, North America, for Thermo King, there are 80,000 fewer available drivers compared to a year ago for many reasons. The federal stimulus increased unemployment benefits for a number of truck drivers who decided not to go back to the job, retirements increased, the CDL Drug & Alcohol Clearinghouse removed 40,000 drivers after a failed drug test and a number of truck-driving schools closed due to the pandemic or are graduating less students than pre-COVID-19. Carriers are now offering incentives and training programs to try to offset this loss of drivers, but it will take time to make up for the lost workforce.
Because carriers were experiencing such high capacity, they took the opportunity to increase rates. This is expected to continue through at least the first quarter of 2021 as carriers attempt to handle the increased freight volumes. For shippers with high-density, desirable freight, they can expect to see a 5-8% rate increase while bulky, less desirable freight will increase 5-10%. This is simply a supply and demand issue – there is not enough capacity, and therefore, shippers will need to pay a premium if they want the space and lanes.
While facing these challenges ahead, the LTL industry is still poised to grow in 2021 and beyond. The best way to prepare for the future is to embrace technology and digitization. The more data companies have about freight, transit times, lanes, carrier capacity and driver availability, the better off they will be to move forward.
Get more information about implementing freight-pricing APIs into your transportation management system by contacting Banyan Technology today.