Learn more about speaker Brian Thompson, chief commercial officer at SMC3, who will be leading a Deep Dive Session on the basics of less-than-truckload transportation on Sunday, April 29, 2018 during the 2018 Annual Shippers Conference and Expo in Orlando, Florida. If you still haven't registered for the conference, do so here.
NASSTRAC: Can you describe in more detail what your deep dive session will cover?
Brian: My deep dive session will cover the basics of less-than-truckload (LTL) transportation from negotiating rates to quoting, booking, and auditing a shipment. It will include a detailed introduction to the National Motor Freight Classification (NMFC). We will also spend time understanding how freight moves in a carrier’s network at a high level so we can then dive down into the drivers of costs for carriers. This understanding will help shippers understand how their behaviors and the characteristics of their freight impact the rates LTL carriers charge. The course will also introduce a number of recent and emerging technologies, such as dimensioning devices and API communication and visibility tools, so that we can discuss where the industry may be headed. We can also share strategies for addressing the current concerns in the market of how to deal with tightening capacity and rising rates.
NASSTRAC: Who would you recommend taking your course?
Brian: I would recommend anyone involved with procuring or managing LTL transportation and looking to gain a deeper understanding of the intricacies of the industry attend this course. This will be a high-level course covering the basics of LTL transportation but the format is designed to allow us to go into a deeper, even strategic, level on specific topics of particular interest to the participants.
NASSTRAC: Why do you think this course is necessary now? How will it address the ever-shifting nature of the industry?
Brian: LTL transportation is the most complex of the transportation modes to engage in many ways. We will take the mystery out of LTL pricing agreements and how to protect yourself from penalties LTL carriers apply caused by not following proper procedures for identifying commodities on the bill of lading and properly engaging carriers. As e-commerce has grown in popularity, more freight is shifting from truckload to LTL transportation as on-demand fulfillment has caused retailers to employ rapid replenishment models. This means transportation budgets become strained as LTL is less economical than truckload or intermodal moves. Education is necessary to optimize management of freight spend while still meeting the needs of the business.
NASSTRAC: Where does LTL transportation fall in among the changes happening in the industry?
Brian: Consumers are more demanding than ever, thanks in large part to Amazon. As all retailers have rushed to meet the increasing demands of their customers, transportation decision-makers and logistics professionals have turned to technology for answers. Technology is changing the landscape of transportation as a whole and LTL transportation is not immune. Transportation management systems have proliferated providing transportation managers with mode optimization tools, advanced procurement applications, real-time shipment tracking and visibility, and constant connectivity to carriers. LTL carriers hear the demands of their customers and are responding with faster service, tighter delivery windows, and white-glove final mile delivery all the while maintaining 24/7 contact with transportation management systems via both EDI and API communication tools.
The industry is also experiencing the strongest economy in many years which combined with a severe driver shortage has resulted in extremely tight capacity. This has caused pricing pressure and strained budgets. When capacity in the truckload industry gets squeezed, loads get pushed towards LTL carriers. Because LTL is only about 10% the size of the truckload industry, even a small percentage shift in volume out of TL can significantly stress LTL carriers. LTL carriers have responded by raising rates but also by better managing the capacity they have available. Key to managing the space on their trucks is ensuring LTL carriers have a great understanding of the volume/size of each and every shipment in their network. The volume of each shipment used to be important just to properly assign costs to those shipments as rates were dependent on National Motor Freight Classification (NMFC) only, but in recent years LTL carriers have been enacting rules to charge more for oversized shipments. For example, ABF recently created a new minimum shipment charge based on shipment size in cubic feet and distance moved called the Cubic Minimum Charge. This charge ensures lightweight, high cube shipments pay for space they occupy on the trailers. LTL carriers have invested heavily in dimensioning technology to automate the measurement of shipment size in order to increase yields and manage their available capacity. Shippers must be aware of these changes in carrier behavior in order to adjust and protect their transportation spend.
NASSTRAC: What predictions do you have for the industry as a whole in the coming years?
Brian: Technology will continue to develop and be leveraged by all players in the industry, including carriers, logistics companies, shippers, and retailers. The necessity to optimize supply chains to get the highest quality service at the lowest price, manage capacity constraints in the industry, and ensure constant connectivity to shipments in motion will only heighten. More shippers will adopt transportation management systems. Carriers will further invest in API technologies to drive information to their customers in real-time.
The need for technology to be successful in the industry will increase the chasm between the haves and the have-nots. The fallout from that spread will result in further M&A activity as the large, successful logistics companies absorb the smaller firms that cannot keep up with the necessary investment. The winner in this situation will be the end consumer (i.e. shoppers) as they get a wider selection of goods, faster delivery, and lower prices.
I also believe there will be a gradual shift towards space-based pricing of LTL transportation as capacity constraints continue and possibly worsen. Measurement technologies will continue to develop, get more mobile, and lower costs for the technology will make the devices more accessible. Once this shift occurs, packaging will begin to get scrutinized and redesigned. As packaging gets more efficient, shipments will get smaller and carriers will further penalize shippers that ship oversized pallets. This is why it is tremendously important to remain educated and utilize technology to adapt to the changing industry.