Why LTL Shipping Rates Are Changing
It’s no secret that anything that is involved in the shipping industry is volatile and is susceptible to change for infinite reasons.
There have been numerous reports that explicitly demonstrate the rise of LTL rates and various factors all contribute to the growth of LTL shipping companies. The market for LTL shipping is evolving and companies who are gearing up to adapt to the new market.
When it comes to rate changes in the LTL shipping market, the changes usually occur in the later period of fall. This year, however, analysts have noticed a rise that is happening earlier than anticipated and, while the changes aren’t larger than expected, they are still adding up due to the premature elevation.
Supply Chain 24/7 exclaimed how “it’s possible – in fact it’s happened before – that we could see two GRIs (General Rate Increase) in a twelve-month cycle.”
Here are the Top 5 Reasons as to Why LTL Shipping Rates are Changing
Increase In Ecommerce
With the emerging concept of “Free Shipping” products that are ordered online are being directly sent to the customer’s homes emphasizing the final mile which translates to an increase in necessity for Less Than Truckload Shipping.
Increase in Manufacturing
Data from the Institute of Supply Management reports that there has been expansion for 9 consecutive months for both raw materials and the end result that would go to the customers, which leads to an increase of need for transportation.
There has been development of new technology that allows transportation companies to offer dimensional pricing as opposed to the old standard of freight classification that impacts the pricing. The technology, i.e. dimensioners, are being used to appropriately measure shipment weight and sizes. The new technology is evolutionary, not revolutionary, change, but the cumulative impact is significant” says a report from JOC.
Shortage of Drivers
There is now an E-Logging Mandate that, combined with the FDA’s Food and Safety Modernization Act, and the reduction of time on the road by a total of 12 hours via the Hours of Service Regulation will lead to higher costs to pay worker wages and the need for more equipment to do the same task. Some motor companies have “begun offering much higher compensation (Walmart pays its drivers $80K) to attract and maintain the most qualified professionals as the driver shortage continues” says Load Delivered.
Increased Operational Costs
Fuel costs are rising. LTL shipping rates are rising. It’s simple as that. In order to operate the trucks you need to fuel the trucks. Since there has been a steady climb in fuel prices then it stands to reason the LTL shipping rates will go up as well. Fuel costs combined with higher wages, and equipment purchases all translate to higher freight rates.
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