The less-than-truckload (LTL) sector is undergoing significant transformation in today's dynamic logistics landscape. With economic recovery slowing in the post-pandemic era, tightening regulatory policies, and increasingly diverse shipper demands, LTL operators face unprecedented challenges and opportunities. To explore these issues, Logistics Management (LM) editor Jeff Berman engaged in an in-depth discussion with UPS Freight President Jack Holmes during the 10th eyefortransport 3PL Summit.
Current State of the LTL Market: Navigating Recovery
LM: How would you characterize the current LTL market situation? How does it compare to last year and year-to-date performance?
Holmes: After the severe challenges of recent years, complaining now seems almost inappropriate given the tremendous efforts by LTL industry executives. While conditions have improved, they remain below desired levels. Growth has slowed significantly compared to last year. In Q1, industry-wide shipment volume and tonnage grew nearly 4% year-over-year, but this figure dropped to about 2% in Q2. Revenue growth was primarily driven by rising fuel prices in Q1, but with recent fuel price declines, we're seeing slower year-over-year revenue-per-hundredweight growth. The situation is improving but still lags far behind pre-recession shipment volumes and tonnage. In fact, last year's industry revenue-per-hundredweight remained below 2007 levels. Beyond real estate, few industries have prices lower than five years ago. Overall, the LTL sector faces challenges but shows gradual improvement.
UPS Freight's Strategic Development
LM: How has UPS Freight performed during the first half of this year?
Holmes: UPS Freight maintains strong momentum. Our entry into LTL through acquisitions of Overnite Express and Motor Cargo allowed us to apply UPS's customer-centric parcel technology to LTL operations, filling market gaps while leveraging UPS's reliability advantage. A key strategy involves cross-selling between parcel and freight services—approximately two-thirds of parcel shippers also transport freight, creating significant opportunities for our sales team. Initially, we assembled a diverse team combining UPS parcel engineers with LTL experts from Con-way, FedEx, and YRC. Today, UPS Freight holds 40% market share and continues introducing innovative technologies like our unique pickup notification system. We're particularly pleased with our technological and reliability advancements.
3PL Partnerships: Creating Mutual Value
LM: How does UPS Freight collaborate with third-party logistics (3PL) providers? What characterizes these relationships and how can they better serve shippers?
Holmes: Five years ago, carriers viewed 3PLs simply as revenue sources. Recognizing that 3PLs control about 15% market share, we asked: "Do we want to lead in 100% of the market or just 85%?" The answer was clear. We developed a strategic approach acknowledging that not all 3PLs operate identically—some follow distributor models while others offer customized solutions. We've become selective, terminating approximately 100 3PL relationships to focus on deeper partnerships where we can provide superior service through technology integration, multimodal solutions (including ground freight pricing that bridges LTL and small parcel), and dedicated transportation. Our strategy involves fewer but more meaningful 3PL relationships where we actively help partners win business through data sharing and integrated solutions.
Economic and Regulatory Impacts
LM: Which concerns you more—economic conditions or regulatory issues like CSA and HOS?
Holmes: We primarily focus on economic impacts affecting our customers. Since 2008, shippers have extensively reconfigured distribution networks, trending toward larger, less frequent shipments across parcel, LTL, truckload, and intermodal markets—particularly fuel-driven intermodal growth. We prioritize understanding customer needs regarding Mexican sourcing, port strategies, deconsolidation near ports, reducing fuel/total costs, and improving supply chain visibility.
LM: Does CSA currently pose greater threats to shippers and carriers than Hours-of-Service (HOS) regulations?
Holmes: CSA raises more concerns due to ongoing uncertainty about score interpretations and enforcement. It will particularly affect carriers offering minimal wages/benefits, forcing them to either improve compensation (impacting pricing) or cease operations. HOS changes present different challenges—especially for reefer carriers—but the greater issue involves potential distribution network disruptions if one-day delivery radii shrink. Many customers established DC locations based on current HOS parameters, and changes could create significant ripple effects.
Pricing Strategies and Capacity Management
LM: Many LTL carriers sacrificed pricing for volume/market share during the recession—an unsuccessful strategy. What lessons emerged from this period regarding yield management?
Holmes: UPS Freight was among the top performers during those five years because we understood our service costs—the foundation for rational pricing decisions. Rather than selling excess capacity, we focused on optimizing existing capacity, often removing surplus. While competitors engaged in rate fluctuations (discounting to fill capacity then raising rates), we maintained pricing discipline. Some carriers lost cost visibility during network downsizing, making proper pricing impossible. Today, LTL companies demonstrate better network understanding and make more rational decisions.
Intermodal Integration and Sustainability
LM: How does intermodal complement LTL operations, particularly regarding shorter hauls typically associated with LTL?
Holmes: Intermodal's advantages emerge in longer hauls (3-5 days) where shipment visibility matters most. For short distances (e.g., Chicago-Milwaukee overnight), intermodal offers limited value. We focus on 4-5 day lanes where midweek pickups can utilize rail. From both cost and sustainability perspectives, intermodal presents attractive options—transferring freight to rail immediately improves carbon footprints. While sustainability factors don't currently drive most decisions, they'll increasingly influence transportation choices regarding carbon footprints and corporate responsibility management.