Q&A: Greg West, C.H. Robinson Worldwide, Vice President of LTL Transportation

LM Group News Editor Jeff Berman recently caught up with Greg West, C.H. Robinson Worldwide, Vice President of LTL Transportation to talk about various aspects of the less-than-truckload sector, including pricing, the impact of e-commerce and last mile services on LTL, and other industry topics. A transcript of the interview is below.  

Logistics Management (LM): What are the biggest differences in LTL marketplace between now and a year ago?

Greg West: The most notable difference in the marketplace is the increase in volume the LTL carriers are seeing.  As discussed in our recent Transportfolio blog e-commerce has been driving more shipments into the LTL space. On top of that, manufacturing has seen nine straight quarters of expansion, as evidenced by the ISM Index – a traditional leading indicator for LTL volumes. 

LM: Is the impact of e-commerce/last mile more significant on LTL than was expected? If so, why?

West: This is hard to determine definitively, however most carriers today are putting a lot of energy into figuring out how to serve the market. One of the big questions is how to deliver large format goods to homes more economically. These are traditionally high cost deliveries and gaining scale is the key to them becoming profitable. Many of the union carriers have been looking for partners to hand off these deliveries. In addition, retailers looking to compete in the e-commerce marketplace are shipping and ordering more frequently.

LM: What are some notable examples of how IT is impacting LTL marketplace?

West: One of the biggest impacts has to be the proliferation of dimensionalizers on carrier docks. Remember, LTL carriers are essentially selling space on trucks. These dimensionalizers are providing more exact information regarding shipment size and the carriers are better able to connect the true cost of moving each shipment.  The National Motor Freight Classification (NMFC) is not always accurate in terms of connecting shipment size. As a result of the dimensionalizer technology, carriers have better information today about their shippers and the costs to handle their freight.

Additionally, shippers of almost any size in today’s market are using technology to route shipments or obtain the best price, which is also impacting the marketplace. Carriers are also using analytics and business intelligence tools to drive pricing decisions.

LM: What is the impact of industry consolidation on the overall LTL market?

West: Consolidation is just a small part of the disruption we have seen this year. Central Freight acquired Wilson in February and has subsequently combined many overlapping terminals. This has built density but has also taken out some available capacity. We have seen other disruptions with regional carriers switching out partner carriers in order to better serve new geographical areas. This includes carriers expanding service areas as well as looking for new partners to offer service throughout Canada and Mexico. With a limited number of carriers making up a majority of the LTL capacity, even smaller changes like these can have a big impact.

LM:  It is often noted that lack of driver availability is not an issue on the LTL side, as opposed to the truckload side--does that remain the case today?

West: In times of heavier demand, yes. Carriers have not added much capacity since 2009, instead choosing to hold capacity steady until they have seen a sustained uptick in the economy. Now with volume increasing, they have the equipment but not the drivers.  As they attempt to attract new drivers, they find themselves competing with other industries as well. Many times, the driver community fluctuates with the construction industry. With the housing market strong, some of this pool of potential drivers has gone to the construction industry. We have heard that the LTL carriers have started to offer additional signing bonuses to attract drivers in certain markets.

Another challenge within the LTL industry is the average age of drivers is increasing. As older drivers retire, it continues to be an industry challenge to replace them. It has also been more difficult to replace them with equal productivity. Finally, LTL carriers often struggle to “scale” to current business levels. As business levels have dramatically increased, the carriers aren’t able to hire personnel to meet demand.