After experiencing a slump and several bankruptcies in recent years, the less-than-truckload (LTL) industry is set to undergo some of the most significant pricing changes in the last three decades in 2025. The new pricing models are expected to change how carriers and shippers interact with market forces, such as demand and regulations, to guide their operations.
This article discusses what is brewing and its impact on the LTL industry at large.
Major Changes in LTL Pricing
LTL pricing changes in 2025 will be both fundamental and incremental. Carriers are pushing to change the industry’s pricing structure and the categories and rates that guide it. Here is what is expected in 2025.
1. Shift to Density-Based Pricing
The less-than-truckload industry has relied on the traditional weight-based system for ages. Although acceptable for a while, the conventional method had a problem that was hard to ignore for modern logistics operations. The LTL pricing focused primarily on the weight of the cargo, which meant that a load that did not weigh much but was quite large would not pay the truckers or carriers appropriately.
However, with the shift to density-based pricing, LTL carriers can now factor in the size and weight of the shipment. This allows them to assess profitability more accurately. More importantly, this shift will incentivize efficient packaging for the shippers and allow carriers to maximize revenue per trailer.
2. NMFTA Classification Adjustments
The National Motor Freight Traffic Association (NMFTA) is revising the classification system for approximately 3,500 items under the National Motor Freight Classification (NMFC). Effective in July, these updates will align with density-based LTL pricing, with the revised classifications resulting in greater variability. For example, items previously grouped under a single category may now fall into multiple classifications based on their dimensions and density.
3. General Rate Increases (GRIs)
Various carriers, such as Old Dominion Freight Line and ABF Freight, announced GRIs toward the end of 2024. Carriers like FedEx and Saia are set to implement theirs in 2025 after announcements during Q4 2024. Ranging from 4.9% to 7.9%, these increases primarily affect noncontract shipments. However, they are expected to influence contract negotiations as carriers seek to offset rising costs and align rates with their enhanced LTL pricing strategies.
Factors Driving the Changes
Although the changes have been coming for a long time and are now inevitable, it is essential to understand what has spurred them and why they are happening now. Here are some of the reasons:
1. Market Consolidation
In July 2023, the third-largest LTL provider went bankrupt and stopped operations. Having one of the biggest in the industry shut down has had multiple ripple effects for stakeholders, such as tightening capacity, thus creating an environment in which carriers could justify higher rates. Following the exit of Yellow, many of its competitors swooped in to acquire its terminals, further consolidating power.
2. Technological Advancements
Carriers are leveraging advanced costing models to fine-tune LTL pricing strategies. These tools provide granular evaluations of lane profitability and customer contributions, enabling more precise rate adjustments. Technology also enhances operational efficiencies, supporting carriers in managing increased shipment volumes.
3. Operational Focus
Carriers are emphasizing revenue optimization by filling and loading their trailers more efficiently. Acquisitions and network expansions, partly enabled by the assets from Yellow, are central to these efforts. Carriers can achieve better margins by improving load factors and reducing empty miles.
Impact on Shippers
Shipping is challenging enough without additional price increases. With the new structure, shippers will bear the brunt of these changes in more ways than one. However, it may not be all bad for them.
1. Higher Costs
The cost per pound for LTL shipments has increased by nearly 60% since 2018, which has already caused shippers to battle higher costs. With the new changes, they can expect noticeably higher shipping costs, which could ultimately impact their operations and their ability to meet their customers’ demands.
2. Greater Pricing Variability
The shift to density-based LTL pricing and revised classifications will introduce variability in shipping costs, making it difficult to plan effectively. Shippers can find discrepancies between estimated and actual charges, making the cost management of their shipping process much more complex.
3. Potentially Increase Efficiency
Shippers must adapt technologies that enhance their understanding of their shipments’ specific characteristics, including dimensions and density. With the knowledge and tech solution, shippers can ensure more accurate cost estimation, better leverage during negotiations, and make operational adjustments. All of this will increase efficiency in the process.
Navigating the New LTL Industry with Wicker Parker Logistics
With the new LTL pricing structure, finding carriers worth the price may be challenging. That is why partnering with Wicker Parker Logistics is crucial. A woman-owned, WBENC-Certified WBE company, Wicker Park Logistics provides flexibility and attention to detail in servicing customers in ways that most larger brokerages don’t usually offer. We help our clients navigate the industry and find the best fit for their needs, including pricing. We have delivered for many others and can do the same for you. Get a quick quote from us today.
