LTL’s Capacity Crunch: Why is it Happening & How Is OD Responding?

Senior VP of Operations
Dave Bates

It is remarkable just how much conditions in the less-than-truckload (LTL) industry have changed in the last year. Carriers have gone from too little freight – and numerous new safety precautions to deliver it – to so much freight that docks are working 24/7 to avoid falling behind.

And yet, the underlying challenges LTL shippers must contend with have not changed a lot. A study Old Dominion Freight Line (OD) conducted with IHS Markit in September 2020 found that during the pandemic, problems such as lengthening and delayed transit times, missed pickups and deliveries, and customer service failures plagued shippers and carriers. In fact, more than 50% of respondents said they faced transit time delays of at least two days.

With conditions changing – restrictions easing and demand continuing to grow – headaches around delays and customer service challenges aren’t going anywhere. The important question is what’s causing the backup, and how are carriers continuing to adapt operations?

It’s a (supply) chain reaction.

We saw the first signs of the capacity crunch around the end of Q3 2020. States began to reopen, and consumer optimism was reflected in growing household spending, up 1.4% in September 2020 to close out a strong quarter. In fact, in Q4 – typically a quarter with less demand for freight – OD exceeded pre-pandemic business levels.

But uneven recovery from the COVID-19 pandemic around the world threw a wrench in shippers’ plans. While big box retailers in the U.S. were ready to sell big-ticket items again, the components needed to were delayed overseas, where case numbers were still high. As factories raced to make up for lost time, the supply chain became clogged with excess product and not enough lanes to get it to store shelves. This led to dozens of ships sitting off the coast of California earlier this year, waiting for port space to open. The ocean freight backup has cleared somewhat, but traffic remains strong, with monthly container volume for the U.S.’s 10 busiest ports surpassing 2019 levels.

Of course, once the goods are off the boats, shippers need ground transportation availability to move goods inland. Hiring shortages are complicating plans to get more trucks on the road. Retailers don’t have the breathing room to wait extended periods for goods, so it is increasingly important for freight lines to open up capacity and deliver on time.

How we’re conquering capacity

Responding to the capacity crunch takes a significant investment in the freight network – to increase both personnel and physical space. These investments need to happen over time and cannot simply happen overnight. So, here are some ways OD is meeting the challenge and increasing capacity:

  • Employees: LTL businesses need to bring on new drivers and find the right-size labor for their business, ensuring each service center is properly staffed for business levels. At OD, we’ve increased our total headcount to more than 20,000 employees nationwide, and we have 1,400 positions open (if you’re interested in learning more about job opportunities with OD, visit our careers page). Since January 1, we’ve hired more than 1,000 Class A CDL truck drivers, and we’re regularly holding job fairs at our service centers to hire more.
  • Equipment: LTL businesses need to significantly increase the number of trucks, trailers and forklifts they are purchasing. We plan to invest $290 million in new equipment this year, and our young fleet – with an average tractor age of 4.7 years, and average trailer age of 8 years – means our trucks are in good condition and can meet the increased demand.
  • Real Estate: LTL businesses need to invest in their existing service centers and upgrade them, while also expanding their footprint with new facilities. We plan to invest $275 million in real estate this year. Since the beginning of 2020, we have added 11 new service centers to our network and moved 10 other service centers into new or renovated buildings with more square footage and yard space.

We anticipate the capacity crunch will remain a challenge throughout 2021 – but with the pandemic-related restrictions easing, we now have some clarity and a path forward. With additional investments to expand our OD family, equipment, and service centers, we’re confident OD is ready to provide superior service to shippers in the months to come.

Need More Information?

Contact us by email or simply call 1-800-235-5569 to be connected to an Old Dominion customer service representative.