2024 RESEARCH STUDY
Wasted Space, Wasted Dollars: The Economic Impact of Inefficient Freight
Research Overview
Less than truckload (LTL) shippers might be drawn in by cost at the surface level, but hidden charges can soon add up. In 2023, the average enterprise shipper paid up to $6.3 million annually on LTL damage and loss claims alone.
In 2021, the shipping industry faced significant challenges due to inflationary pressures, which led to compromised service quality and stringent carrier constraints, with DAT TL spot rates soaring by 56.1% Y/Y. However, as the industry entered a deflationary phase between 2022 and 2023, these spot rates plummeted to -31.8% Y/Y, offering shippers some respite and more options. Despite this, inefficiencies persisted, and with the anticipation of a return to inflation by the end of 2024, a majority of shippers (90.8%) have proactively increased their budgets by 1 to 10% to adapt to the expected market conditions.
Although shippers prioritize innovation, particularly in the AI and automation space, they recognize that these new technologies may expose vulnerabilities.
This year’s study conducted by Drive Research investigated how changing market conditions affect the industry. Surveying 1,000 transportation decision-makers from different industries, the study uncovered key inefficiencies in the U.S. freight landscape.
Current Market Conditions
Key Takeaways
- U.S. consumption growth and a steady inventory to sales ratio suggest a strong market with low near-term recession risk.
- Imports have rebounded from recent lows and are poised to break inflationary this quarter, another positive signal.
- Despite flat industrial production, a 5% increase in diesel prices in February may indicate a shift towards rising production costs.
Market Forecast
- Spot rates are expected to break Y/Y inflationary in Q2.
- Contract rates will likely follow suit, breaking Y/Y inflationary by mid-year.
- By December, spot truckload linehaul rates are projected to increase by +30%. So, the penalty cost to ship air in underutilized truckloads will only run higher.
Widespread underutilization of truckload trailer space continues in 2023
43%
Here's why: In 2023, with the average less-than-truckload (LTL) cutoff at 10 feet, shippers frequently faced a dilemma: opt for the unpredictability of LTL services or resort to shipping with partially filled truckloads to comply with their stringent delivery timelines. In order to avoid shipping partially empty loads, 22% of TL shippers waited to ship until they could fill an entire truckload.
Lastly, 16% of shippers booked truckloads “often” or “very often” because they weren’t sure another option would deliver the freight on time, and 25.5% often booked truckloads because they were unsure another mode would deliver freight without damage.
The True Cost of LTL
LTL's cost-efficiency can be a common misconception in many cases, as surprise fees and handling risks can lead to higher overall costs.
LTL shippers are spending millions on damage and loss annually
In 2023, shippers reported an average LTL damage rate of 1.94%.
This means 1 in every 51 shipments resulted in a damage or loss claim in 2023.
The average cost for these claims is around $3,777 per LTL shipment, with larger companies facing higher expenses, likely due to their larger shipment sizes.
These frequent damage and loss claims add up to significant losses over a year, with the largest shippers incurring up to $6.3M in damage and loss claims in 2023.
Reducing damage claims improves customer retention as one respondent pointed out, saying: “The likelihood of losing to competitors is reduced by minimizing damage and delays.”
Surprise LTL fees
There’s also the chance that LTL shipments will incur unexpected accessorial fees such as reweigh, reclass, or overlength fees.
Respondents stated that the average cost per LTL shipment for these fees was just over $419. These fees, which can be difficult to budget for, hit automotive businesses the hardest, averaging $548 per shipment.
This soon adds up with the largest companies paying $2.3M in accessorial fees in 2023.
The cost of managing hidden LTL expenses
When managing damage claims, disputes, and accessorial fees, 37.8% of businesses have one or more employees dedicated to managing these areas.
This means that on top of the fees themselves, there’s the added time spent by employees to manage them. Reducing the frequency of these fees and claims could cut overhead costs or free up employees to focus on more pressing matters.
While some budget is going towards adopting new technology (6%) to ease these concerns, 20% of shippers are worried about increased shipping costs in 2024.
As costs eventually begin to rise across the industry, shippers are doing what they can to maximize trailer utilization with 46.2% of shippers waiting more often to fill a truckload over the past two years.
For many, these strategies are working, with 92.1% of shippers reporting an increased load size of 1 to 10%.
Despite this, shippers are still spending money on shipping air, with 43% of trucks traveling over half-empty in 2023.
Shippers are under more pressure than ever to reduce operating expenses.
Investing in tracking tech: Shippers' response to delivery demands
The surge in e-commerce has forced shippers to adhere to stringent delivery schedules or risk incurring hefty OTIF penalties that can escalate into millions annually. Simultaneously, new digital platforms facilitating online load bookings for drivers have heightened the risk of fraud and theft.
This is why tracking is one of the top factors businesses look for when choosing a shipping provider, with 56% stating its importance. This helps to avoid delays and allows the shipper to better communicate tracking information to the customer.
“Tracking and visibility are top priority so that we can monitor the movement of materials in real-time throughout the supply chain while tracking inventory levels, shipments in transit, and enhancing our logistics capabilities.”
-Survey Respondent
New technology presents new opportunities for fraud and theft
With the adoption of new technology comes challenges. Although shippers are willing to innovate, they mentioned that technology has exposed more opportunities for fraud and theft, a stated concern for 19.5% of respondents just behind service issues (26%).
How this is trending, however, varies by industry. While fraud and theft rates in the automotive and packing industries are decreasing, decision-makers in retail and the food industry indicated increased rates of fraud or theft.
89% of shippers were impacted by theft/fraud in 2023
13% of respondents stated they were unprepared for instances of fraud and theft in 2023, leading to 58% planning to invest in new tracking visibility technologies within the next 12 months.
"In 2023, I wasn’t prepared for… significant disruptions to shipping operations and business activities because of the theft of the goods and products.”
-Survey Respondent
Changing consumer demand for sustainable products
In November 2023, The Financial Times reported that 64% of consumers globally are worried about sustainability. This affects their spending habits and while many are looking to make greener choices, what’s often more important is transparency. According to Forbes, "94% of consumers are more likely to be loyal to a brand that's completely transparent."
For companies looking to get ahead, this is good news but it puts pressure on shippers to look for more efficient solutions. For instance, Shared Truckload service reduces Scope 3 emissions by 15-40% by reducing empty trailer space.
In this survey, slightly more than 10% of shippers marked “Reducing Scope 3 emissions” as a top three most important factor when selecting a shipping provider, alongside tracking/visibility, avoiding delays, avoiding damage, and other core competencies of logistics partners. Sourcing departments were 2.7x more likely to include “Reducing Scope 3 emissions” than other teams.
7% of all shippers expressed concerns related to changing consumer preferences and regulations in the sustainability field in 2024 that weren’t present in 2023.
“The ongoing trend of shifting consumer preferences towards eco-friendly and sustainable products is expected to exert a significant influence on the industry landscape.”
-Survey Respondent
“Compliance with evolving environmental standards requires significant investments in sustainability initiatives and technology upgrades, and this is a major concern for us”
-Survey Respondent
Drive up profit, drive down costs with FlockDirect®.
Here’s how FlockDirect® reduces costs:
- Only pay for the space you need while still receiving truckload-level service
- Enjoy safe transit, FlockDirect shipments are 7.5x less likely to incur damage than LTL.1
- Avoid the unexpected accessorial fees that come with the hub and spoke system, get accurate quotes
- Meet your MABD dates with direct routes and weekend transit, reducing the risk of OTIF fees
72% of shippers acknowledged a plan to invest in innovation, yet remain entrenched in traditional cost models that have persisted for decades. The millions of dollars in costs outlined in this study can all be eliminated by switching to Flock Freight’s Shared Truckload service, FlockDirect®.
By leveraging Flock's patented technology, FlockDirect® combines shipments from multiple shippers in real-time, ensuring that freight stays on the same truck from pickup to delivery, reducing the chances of damage, delays, and theft.
Flock Freight takes extra precautions when it comes to security. When you ship any mode with Flock your shipment is significantly less likely to be impacted by theft than the industry standard rate.
In 2023, shippers reported that 2.3% of their shipments were impacted by fraud or theft, that’s 1 in 43 shipments.2 At Flock, we achieved a 99.8% theft-free rate for all shipment types in 2023.3
2 Source: 2023 Drive Research Study
3 Disclaimer: 99.8% reflects all reported claims and may change as new claims are surfaced.
Methodology
The data supporting the content and objectives set forth in this paper come from an online survey conducted by Drive Research, a third party not affiliated with Flock Freight. The survey took an average of 30 minutes to complete and included 57 questions and received 1,000 responses. Fieldwork for the survey began on February 22, 2024 and ended April 1, 2024.
Target industries included retail, industrial machinery/equipment, building materials, food/beverage, technology/electronics, automotive, and plastics/paper/packaging. Target participant titles varied based on the size of the business (i.e., C-Suite officials, Vice Presidents, Directors, and Managers). A strong mix of company sizes to segment the data by the market included a distribution of $10M to $99M annual revenue, $100M to $499M annual revenue, $500M to $999M, $1 to 2.9 billion, and $3 billion or more annual revenue.
With a probabilistic sample, a total of 1,000 responses at the 95% confidence level offers a 5% margin of error. If the survey were conducted with another random pool of 1,000 respondents, the results would yield within +3% or -3% of the stated totals in the reports. The margin of error can be used as a guideline to understand the reliability of these results.
