The landscape of the U.S. less-than-truckload (LTL) market is undergoing a notable transformation, driven by a surge in merger and acquisition (M&A) activity. As larger companies like TFI International and Knight-Swift Transportation Holdings eye the opportunities presented by this consolidation, it's important to recognize that much of the movement is occurring from the bottom up, with smaller carriers making significant strides.
A Shifting Market Landscape
The recent collapse of Yellow in July 2023 has sent ripples through the LTL sector, prompting shippers to reevaluate their options in a market that has already been characterized by consolidation. The fallout has led to a scramble among smaller carriers, many of which are seizing the opportunity to expand through acquisitions. Mike Moran, president of Moran Transportation, emphasized this sentiment, stating, “If you’re not growing, you’re sinking.”
Moran's recent acquisition of RMX Freight Systems exemplifies this trend. Although the financial terms were not disclosed, the acquisition expands Moran's coverage area and enhances its operational capabilities, adding three states to its service network and increasing its fleet to 675 vehicles. This move not only demonstrates Moran's commitment to growth but also highlights the competitive pressures smaller LTL carriers face in an evolving market.
The Rise of Smaller Carriers
Interestingly, while the largest LTL providers dominate the revenue landscape—accounting for 91.8% of the sector’s $56.6 billion total revenue—smaller carriers are showing impressive growth. For instance, CrossCountry Freight Solutions experienced a dramatic rise from 40th to 25th place in the Journal of Commerce/SJ Consulting Group rankings over just a few years, thanks to strategic acquisitions. This pattern is echoed in other recent deals, such as DC Logistics' acquisition of GLS’s U.S. freight business, which included LTL assets like Mountain Valley Express.
As Satish Jindel, president of SJ Consulting Group, pointed out, small carriers are increasingly combining resources to gain a competitive edge. “As a small carrier, it’s increasingly difficult to have all of the ‘three Ts’—terminals, talent, and technology,” he remarked. The pressure to consolidate is further intensified as shippers streamline their operations and reduce the number of carriers they engage with.
The Value Proposition for Shippers
For shippers navigating this turbulent environment, smaller carriers are emerging as a valuable option, despite common perceptions that larger companies may offer better deals. Moran warns that reliance on large LTL providers can come at a cost. “When the big carriers are the last ones left standing, you will pay whatever they want,” he cautioned. This potential for rate hikes—particularly with large carriers looking to increase rates in 2025—adds urgency for shippers to diversify their carrier options.
Moran Transportation, while not ranked among the top 40 LTL carriers, is actively pursuing a growth strategy that focuses on maintaining high-quality service rather than competing solely on price. “We target customers who demand high-quality service in our market, but we won’t haul for free,” Moran stated, reflecting a philosophy that resonates with many smaller carriers.
The Competitive Landscape Ahead
As we look ahead, the shrinking pool of LTL providers will likely pose challenges and opportunities for shippers. With larger carriers tightening their grip on the market, smaller companies must continue to adapt and innovate. Moran’s proactive approach—considering six to eight potential acquisitions before settling on RMX—illustrates the agility required to thrive in this dynamic environment.
The consolidation trend among smaller LTL carriers will not only reshape their operational capabilities but may also redefine the competitive landscape for shippers. With more carriers joining forces to enhance service offerings and geographical coverage, the options available to shippers will become more diverse, even in a consolidating market.
Conclusion
The current state of the LTL market serves as a reminder of the importance of agility and strategic growth in the face of consolidation. As smaller carriers continue to expand through acquisitions, shippers should remain vigilant in exploring all available options, recognizing the potential for high-quality service and competitive pricing that smaller, agile providers can offer. At Gain Consulting, we are committed to helping our clients navigate these changes, providing insights and strategies to optimize their supply chain amidst the evolving landscape of the LTL market.
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