Written by Marcia Jedd
Midwest LTL market tightens
A number of LTL market developments and underlying conditions are driving these trends where the Midwest is a key hot spot in the noticeable LTL capacity squeeze nationwide. While actual demand for LTL capacity may be low currently in some areas, structural capacity remains tight in some areas as a number of regional carriers have exited the market. This is on the heels of Yellow Freight’s leaving the market in 2023 following its bankruptcy—not all of the nationwide LTL carrier’s former terminal capacity is reported to have re-entered the market.
The Midwest market has more recently experienced volatility due to another exit of a key regional carrier which has forced shippers to reconsider their routing options and carrier partners. Especially in regional LTL, freight from a carrier exit rarely re-enters the market without friction because lane balance, terminal density, and shipment characteristics play a large role in economics.
Regulatory moves for English-only driver testing
Another downward driver of LTL capacity and the broader trucking market is from a new FMCSA ruling, effective on March 16, 2026, which restricts non-domiciled commercial driver’s licenses (CDLs) and enforces stricter English-only testing mandates which sidelines a portion of the independent driver pool. One fall-out of these new restrictions is the safety valve of small owner-operators that 3PLs typically rely on during surges. According to FreightWaves, approximately 200,000 drivers—roughly 5% of all CDL holders—are potentially impacted as they renew licenses, putting increased hiring pressures on carriers. The FMCSA regulatory shift is expected to have the biggest impact over the next three years and is sure to accelerate driver shortages, increase compliance costs, and threaten to boost freight rates.
Regional economic activity and mode shifts into LTL
Regional activity in a number of industrial and manufacturing segments such as automotive-related shipments have also remined relatively strong in the Midwest compared to other regions, keeping demand for regional LTL services high, in addition to other seasonal activity.
Mode shifts are also constricting the LTL market. As suggested earlier, increases in year-over-year TL rates and tight TL capacity have also contributed to push some freight into the LTL market. Other freight, given strained TL capacity and pressure in the Midwest, moves to intermodal for long haul shipments.
Why the high rate environment?
All of these forces have led to higher LTL rates. Many major carriers have maintained strict pricing discipline and implemented mid-single-digit rate increases in their general rate increases (GRIs) to protect their margins. The LTL rates are generally negotiated over extended periods which makes for sticky rates that take longer to reverse.
Higher-than-usual load rejections in the Midwest have been reported with tight capacity across key local hubs. Larger regional and national LTL carriers are holding the line on pricing too amid the current high cost of fuel. Carriers are also raising rates to recoup other operating costs such as increases in labor, equipment maintenance, and insurance.
Higher rates also come on the heels of “lumpy” demand. This means instead of a steady flow of goods, we see massive waves of freight hitting warehouses, which then spikes LTL demand as those goods are distributed to retailers. One big contributing factor is the build-up of inventories that started last year with the anticipation of higher tariffs with key trading partners like China, Mexico and Canada. As we reported on earlier this year with ongoing legal battles over IEEPA tariffs (and anticipated potential for tariff refunds), shippers are again stockpiling their inventories such as components and finished goods.
Here are strategies shippers can use to control LTL freight costs:
- Use technology and analytics
First, from simple spreadsheets to more complex applications, it’s easier today to understand the total cost of shipping. On actual freight costs, many of today’s leading TMS (transportation management systems) make it easy to leverage data by analyzing historical data, rate shop and measure carrier performance such as on-time delivery rates. Your 3PL can also monitor and report on freight costs.
Comprehensive reporting capabilities in TMS and other systems enable shippers to do analysis such as gathering 12 months of shipment history, such as origin/destination zip codes, weight, pallet count, freight class and current rates. Then they can determine where the highest costs are coming from, whether from base rates, fuel surcharges, or accessorial fees. This type of freight profile optimization of aligning shipments with a carrier’s operations helps minimize costs and gives negotiating power. For example, where freight is dense and easy to handle makes it more attractive to carriers.
- Leverage 3PL relationships
Focus on capitalizing on relationships with your 3PLs partners to optimize costs by leveraging their volumes and networks. Because of their aggregated volumes, 3PLs can secure better discounts from carriers than individual shippers and pass on these savings through negotiated rates. 3PLs know which carriers are most competitive for specific lanes which means they can more easily switch carriers to the most cost-effective option for your specific shipping needs.
- Explore alternative modes and consolidate freight
Lastly, consolidating freight loads is often the most economical choice. Use mode-shift analysis to determine whether some consolidated loads or borderline LTL shipments should shift to partial TL or intermodal. Given the pressure in the Midwest, many are looking at increased use of intermodal for long-haul, though this is less applicable for short-haul LTL.
Consolidation and pooling of LTL shipments is another service of 3PLs. Collaborate with your 3PL to combine multiple smaller orders bound for similar destinations into one, converting them into volume LTL or full TL for lower costs. Pooled distribution leverages regional 3PL networks to transport large loads to local areas, then breaks them down into shorter, less expensive LTL deliveries. Worley Warehousing is a leading Midwest 3PL and warehousing provider that offers pooled distribution for cost savings, among other services.