Watch Now

Blurred lines: Carrier expansion creates challenges, opportunities for shippers

Diversifying carrier base shields shippers from capacity pitfalls

(Photo: Jim Allen/FreightWaves)

Once upon a time, carriers could be easily categorized by length of haul or by amount of freight moved in the trailers. Now, however, it is impossible to neatly place companies into these broad groups. Carriers no longer limit themselves to regional or long haul, full truckload or less-than-truckload.

Mergers, acquisitions and the desire to diversify their businesses now present a carrier landscape in which a company that was once primarily a truckload carrier is now a broker, a marketplace, a 3PL, a consultant or even a final-mile delivery company. 

These blurred lines present both opportunities and challenges for shippers looking to partner with the carriers that best suit their individual needs. With more choices than ever, shippers must come up with a plan for choosing — and evaluating — their carrier partners.

“The vetting process is more important than ever. Have the carrier walk you through their capabilities and their network, and have them share case studies about their customers,” Emerge SVP of Strategic Operations Mark McEntire said. “Ask them to articulate where their strengths and weaknesses lie. Everyone has weaknesses, and the shipper should be aware of them.”

As part of this process, shippers can also seek out benchmarking data about potential carriers from their shipping peers.

When working with carriers that also boast in-house brokerages, there are even more questions to consider. The “right answers” all depend on what a shipper is looking for. 

“In the vein of efficiency gains, operating ratios and shipper of choice, it will be important to understand a carrier that is both an asset and a broker,” McEntire said. “Where will they use their brokerage? Will you allow it? Do they have drop equipment capabilities to balance out your goals related to drop and hook versus live load appointments?”

Once a shipper has partnered with a carrier, one of the simplest and most effective ways to keep tabs on carrier performance is via scorecards and quarterly reviews. During this process, shippers should measure carrier performance against their own service standards.

“Many shippers only review metrics on a regular basis with high-volume carriers,” McEntire said. “I would challenge a shipper to review service with high and low performers, regardless of volume. Carriers want to know how they are doing and that their measurements are aligned with the shippers.”

When reviews are conducted on a regular basis, shippers have the opportunity to reward high performers with higher volumes or other valuable incentives. This practice both strengthens carrier relationships and ensures shippers are relying most on the strongest partners.

Simply measuring performance may not paint a full picture of the shipper-carrier dynamic, however.

“Shippers should also measure tender acceptance and report on it. This is a two-way street — a shipper committed to volume and the carrier committed to capacity. If one or the other falls short, or if volume grows significantly, it matters,” McEntire said. “Hold each other accountable. Many times, a carrier will keep accepting the excess volume. They think they are doing the right thing, but they ultimately fail because they don’t have the capacity.”

While carriers are offering more services now than ever before, shippers should consider the risks and limitations inherent to placing all their eggs in one basket. 

According to American Trucking Associations, small trucking companies and independent owner-operators make up most of the nation’s freight carriers; 91% of fleets operate with six or fewer trucks and 97% operate with 20 or fewer. Shippers must be especially cognizant about overextending these companies. Too much pressure can ultimately result in carrier bankruptcies, leaving one company destitute and another stuck for options.

“The COVID-19 pandemic forced over 3,100 trucking companies out of business in 2020,” McEntire said. “Make sure you have a consistent cadence around reviewing a carrier’s financial stability and keep the lines of communication open.”

McEntire suggests having a routing guide that goes three or more carriers deep on each lane to provide contingency options and carrier partners that a shipper wants to grow with.

“Grow a carrier based on merit, but grow smart. Understand their fleet size and their capabilities, and don’t overextend them,” McEntire said. “Diversification is important. If service, tender acceptance or communication begin to fail, it becomes much more difficult to quickly source new capacity for the network.”

Click here to learn more about Emerge

Ashley Coker

Ashley is interested in everything that moves, especially trucks and planes. She covers air cargo, trucking and sponsored content. She studied journalism at Middle Tennessee State University and worked as an editor and reporter at two daily newspapers before joining FreightWaves. Ashley spends her free time at the dog park with her beagle, Ruth, or scouring the internet for last minute flight deals.