To understand how important the trucking industry is in the US, it’s important to know the society and its general ways of life.
The US has a set of ideals called the American dream (democracy, rights, liberty, opportunity and equality) in which freedom includes the opportunity for prosperity and success achieved through hard work in a society with few barriers.
With a high standard of living and the ease for every person to create a good life for themselves, “the American dream” became closely related to the consumer culture, with an abundance of material goods available to all, making the Americans proud to be the richest society on earth.
The ever-expanding variety of goods allowed people to fashion their own particular lifestyle and broaden the consumer experience in terms of purchasing skills and awareness of the market.
All this was achievable for everyone regardless of the area where they live, large urban areas or small rural areas. This formed the enormous demand for all types of goods to be available in all places within the US.
The free and open market on the other side made it possible for all companies to make products in large quantities and offer them throughout the US. For example, a bakery in Pennsylvania could make bread and sell it thousands of miles away to millions of consumers; a potato farm in Georgia could supply the supermarkets in Seattle and New York etc.
The most convenient way for everything to be available to all places is by delivering these goods and raw materials mostly (70% of the freight) by the trucking industry using the interstate highway network.
To put it simply, the trucking industry is keeping the American dream alive and available to all.
If the trucks stopped driving the supermarkets would be out of supplies in less than a week.
Different segments of the trucking industry in US
Trucking is an enormous industry, and as such, it’s pretty hard to segment it. There are many different ways in which you can slice this $700B market: short haul vs. long haul, less-than-truckload vs. full-truckload, by fleet size, and more.
The entire U.S. freight transportation industry which includes various modes of transport (air, water, rail, pipeline, trucks) is worth roughly $1 trillion. Trucking makes ~70% of that amount.
U.S. trucking: ~$700B
Let’s break that number down and dive solely into trucking. The most commonly cited source for the size of the trucking industry is American Trucking Associations. According to their research, the market was $726B in 2015, $676B in 2016. Taking those numbers into account, we can assume the current market lands somewhere around $700B in size.
Furthermore, there are different types of shipments that comprise this market:
- Courier service & parcel delivery
- Less-than-truckload shipments
- Full & partial truckload shipments
Courier service & parcel delivery: ~$60B
The courier and parcel delivery in the US mainly involve the transportation of non-palletized and light goods (<110 pounds).The U.S. courier and parcel delivery market is around $60 billion USD in size. Key players include the U.S. Postal Service, FedEx, UPS. It is a very concentrated sector, with these top 3 companies bringing more than half the revenue for the entire sector. UPS is the leader, with $26B in revenues from ground package delivery.
Courier service & parcel delivery market highlights:
- Online retail drives fast growth
- Amazon has shown multiple signals to be entering the space
- Some tech startups such as Shyp and Postmates are attempting to disrupt this market, but it’s not easy because of incumbents and operational complexity.
Less-than-truckload: ~$40B
Less-than-truckload (LTL), involves the transportation of shipments larger than parcel, but not large enough to fully occupy the trailer volume of a semi truck. LTL freight generally weighs less than 10,000 pounds. Since a truck can carry multiple less-than-truckload shipments, many LTL carriers utilize a network of terminals to optimize operations. This market is around $40B in size. The largest players in this market include XPO Logistics ($3.4B) FedEx ($5.9B), ODFL ($2.9B), YRC freight ($2.9B).
Full truckload segment: ~$600B
Full truckload (FTL) shipping, which also includes partial shipments, is the movement of large amounts of homogeneous cargo — generally the amount necessary to fill an entire semi-trailer or intermodal container. In most cases, heavy trucks can haul up to 50,000 pounds.
There are two types of fleets in this group: for-hire and private.
- For-hire fleets don’t own the freight, they simply offer the transportation service.
- Private fleets are large shippers like Walmart or PepsiCo who manage their own, in-house fleet of trucks.
For-hire full truckload segment: ~$350B
Some of the largest fleets in this sector include Swift Transportation, J.B. Hunt, Schneider, Knight Transport. However, it’s not difficult to lease a truck and start a carrier operation. Therefore, this segment is extremely fragmented, with 90% of fleets having fewer than six trucks.
Full-truckload market highlights:
- This sector has been attacked by startups the most. This is because it’s less complex than LTL and parcel, and it contains a larger piece of the pie. The most funded startups like Transfix, Convoy, and Uber Freight focus on freight-matching. Essentially, they are replacing traditional brokers by utilizing mobile technology and automating manual operations.
- FTL is very fragmented. The top 50 fleets comprise roughly 10% in revenues, and 90% of fleets have fewer than six trucks.
- Self-driving technology is likely to disrupt this segment first, because FTL is mainly long-haul, and it’s easier to teach a truck to drive on a highway than on busy streets.
Explore the top 100 For hire companies:
https://www.ttnews.com/top100/for-hire/2019
Private fleets spend ~$250B
Large shippers like PepsiCo or U.S. Foods don’t want to outsource their logistics for two primary reasons: control and cost. For such companies, it indeed makes sense to have their own fleets because the economies of scale are the same as for large, for-hire fleets, but the control over the operations is in-house, which is crucial for shippers of groceries like Walmart.
There is little readily-available data on the actual trucking spend by each private fleet, but there is a list of the largest fleets here.