LTL executives address market trends at SMC3 Connections conference

Amid a mixed economic outlook, three less-than-truckload (LTL) executives examined various business drivers, in terms of how they are impacting LTL market and economic conditions, at SMC3 Connections conference, which was recently held in Colorado Springs, Co.

The session’s panelists included: Dennis Anderson, Chief Strategy Officer, ArcBest; John Luciani, COO, LTL Solutions, A. Duie Pyle; and Kent Williams, EVP, Sales and Marketing, Averitt.

Moving Manufacturing: Looking at the impact of manufacturing, a key growth driver in the LTL sector, the panelists explained that while manufacturing activity remains on the lower end, due to an ongoing stretch of slow growth, there is some reason for optimism.

Averitt’s Williams said that he thinks manufacturing activity is on an uptick.

“It is certainly not taking off like a rocket ship as it did post-pandemic, which is what happened for retail [freight],” he said. “We feel it in all segments, especially as truckload is coming back. Construction and retail sales are components that drive our respective networks, but we definitely see an uptick in manufacturing, and we are also obviously watching that transition into near shoring and friend shoring. We feel it. It is good, and we need it.”

And A. Duie Pyle’s Luciani explained that in the Northeast, where his company is based, manufacturing [growth] has been on a slow uptick, coupled with a few different obstacles. 

“The cost of ground to build a manufacturing facility is prohibitive, and the municipalities are overwhelmingly difficult to build in a lot of cases,” he said. “Obviously in the Northeast, it is more of a consumption environment, but it is a part of our business. I think it is cost that is what prevents manufacturing in the Northeast.”

For example, Luciani, a native New Englander, observed that many textile operations moved from the Fall River and New Bedford, Mass.  region to the Southeast and into the Carolinas years ago, with a lot of those mills today still remaining empty.

ArcBest’s Anderson agreed with the comments made by Luciani and Williams, while adding that his company sees things as being similar to what the indicators are showing in its business.

“Manufacturing certainly is still a major part of our business, and is still a major part of what is driving and what is going on in the freight markets,” he said. “There is a lot of focus on retail and rightfully so, but, certainly, when you start to look at a rebound, particularly in the LTL world, manufacturing is still very important to that recovery.”

Volumes and tonnage: Looking at the market conditions, in terms of tonnage and volumes, the panelists said that things could be viewed as encouraging.

For Averitt, Williams said that every KPI and every vertical it references is on the upswing, with LTL activity growing annually and sequentially.

“Everything's been moving in the right direction, finally,” he said. “Truckloads had a rough patch over the past year and a half, but it's starting to move in the right direction. I don't think this year’s Peak Season will be explosive, but I do think there will be modest, continued growth that should be good for all of us.”

And for A. Duie Pyle, Luciani said that when there's available truckload capacity, customers that have typically moved to buy dedicated, dedicated carriage, and contract carriage are now moving back into one-way purchased transportation. The reason for that, he explained, is because capacity can be purchased at a cheaper rate.

ArcBest’s Anderson noted, that based on seasonal trends and also indicators, it seems like a more typical cadence or rhythm is returning.

“Probably the closest indicator is looking at KPIs for the verticals we serve,” he said. There's definitely not some huge change coming, in terms of where the market heads in the rest of 2024, so certainly we are hopeful and keeping a close eye on things.”

Parcel effect on LTL: Looking at the intersection of LTL and parcel, the panel observed that, in some cases, the “Amazon effect” of quicker deliveries and increased visibility is becoming more apparent in LTL.

Averitt’s Williams explained that as his company continues to have to dig deeper to meet its customers’ expectations, it is not necessarily related to the parcel world, albeit maybe somewhat it is more indirectly.

“We have seen some freight migrate from parcel carriers into the LTL space, which is probably another impact on that declining average shipment size, and at least average shipment weight,” he said. “One customer we met with that is a fairly substantial customer of ours, said that they would much rather present their products to a customer in one pallet at one time, versus loose boxes. And that, of course, is just a perception thing, but we've definitely seen a few start to get down the weight breaks. I think the LTL carriers have captured some market share from the parcel guys, in some cases.”

ArcBest’s Anderson noted that when thinking about LTL taking market share from parcel, he some of that is determined by how parcel carriers feel about non-conveyable-types of freight, and whether that pricing is trending up.

“LTLs certainly they've gotten a lot more focused on dimensional pricing in the last few years, and that's driving some of that and being seen and felt in LTL as well,” he said.