April 05, 2018

TL/LTL Shipping - Ecommerce Growth May Boost LTL Volumes

AMZN, JBHT, KNX, ODFL, XPO
By Alysha Colangeli
Rapid growth in ecommerce could bolster LTL and parcel shipping volumes during the next 12 months as shippers beef up final-mile operations to capture a larger portion of ecommerce activity.

Ecommerce Regional Distribution Model Should Help LTL and Parcel Carriers
Sources interviewed for OTR Global's March 29 TL/LTL report anticipate growth in ecommerce could shift the shipping landscape during the next 12 months, with last-mile delivery becoming a greater focus as consumers’ expectations for quick deliveries grow. Seven sources said it would likely have a larger effect on parcel and LTL capacity than TL capacity. “I think you are already seeing several LTL carriers beef up or create final-mile operations. XPO [Logistics Inc.] has the largest final-mile operation. Someone orders a washing machine, it might move via truckload from the point of origin to the distribution center, but someone has to move it to the consumer. Estes [Express Lines Inc.] has a good final mile and [ArcBest Corp.'s] ABF Freight is beefing theirs up,” an LTL carrier said. “From what I see, it's impacting the expectation. More are expecting that '[Amazon.com Inc.] experience.' There's no impact from a capacity perspective -- it’s just created a new norm of expectation. We've definitely seen an impact on capacity on the parcel end,” said a consumer products shipping executive.

Growing Ecommerce Volumes May Squeeze TL
Six sources said the rise in ecommerce demand might take volumes away from TL, particularly given the shifts in distribution away from retail stores toward distribution centers. “If Amazon continues to build distribution centers, it drops the overall TL demand,” a fleet executive said. Another shipper said parcel services could take volumes away from TL, as ecommerce takes share from big-box retail. “FedEx [Corp.] and United Parcel Service Inc. will have rapid growth and you'll see a shift away from big TL carriers. I think the trucking job of the future will be more of a delivery-type job,” he said.

Some TL fleets are seeing the opportunities offered by ecommerce growth but now prefer to subcontract the business rather than make capex investments. “We are seeing more small and medium-sized fleets being contracted to do final-mile deliveries for larger TL fleets. Werner [Enterprises Inc.] is one who is contracting out final-mile delivery,” a dealer said.

Additional Quotes
“TL volumes should drop. We see a lot of shippers losing TL volumes to Amazon. Small parcel is blowing up for sure, which could lead to decreased TL and LTL volumes.” Broker executive

“I do see LTL getting more into ecommerce with home deliveries because they're looking for different types of modes to do the final mile. I could see LTL growth with that final-mile piece.” Fleet executive

“Ecommerce is not really impacting us, but we are seeing the impact in the industry. Amazon keeps getting into these warehouses. Product has to get to those, then going out from there, those final-mile deliveries. It’s really evolving. It’s like freight on demand.” TL carrier

“We see and talk to enough people to know that Amazon's effect is significant -- probably in the real world [Amazon’s effect] is bigger than ELD.” Logistics executive truckload fleet

“While there's a lot of growth in ecommerce, it's small compared to the big retail, and a lot of that moves parcel. Where I think you'll see volume grow is from those fulfillment centers where they choose to do TL. There will be a significant impact on the inbound side. Ecommerce is seeing 20%-plus growth, but that's still a small piece of the big retail pie.” Shipping executive

“A greater move toward medium-duty trucks is expected from further pressure on freight rates. With the model and the product that ecommerce wants to move, it will just put strain on the network. It will just be more of a driver on rates and move toward unmanned vehicles.” Food and beverage shipper

“The ecommerce effect will push larger retailers to diversify. We have made acquisitions to enhance our ability to compete.” Retail shipper

Contributors: Julie Woodruff

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