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How to Diversify Your Truckload Carriers & Why You Need to

When you’re picking carriers to move your freight, there may seem like an overwhelming number of options. In fact, there’s an estimated 206,600 for-hire full truckload carriers in the United States. Yet despite all the options, securing the equipment you need can be challenging—especially during a tight market.

Available truckload capacity changes all the time. A wide variety of economic, social, political, and environmental factors can influence how you experience available capacity. That’s why it’s critically important for you to establish relationships with a variety of suppliers and engage with broader capacity communities. Fulfilling your capacity needs can be simpler with the right capacity strategies.

Recent research—a joint collaboration between MIT graduate students, C.H. Robinson, and TMC—suggests that the best truckload strategies combine both large and small asset carriers with the expertise of a third party logistics provider (3PL). Here’s why:

Today’s market is becoming highly optimized
Diversifying your truckload supplier strategy starts with aligning segments of your supply chain with capacity communities. Find and capitalize on opportunities where your freight attributes and the demands placed on transportation align with what the capacity community needs. In other words, when your goals match provider goals, everyone is happier.

Carriers who are leveraging yield management tools may have very specific lane and volume needs and will decline opportunities (either by not offering a price or offering a price that is outside of market) that don’t contribute to increased fleet yield.

These carriers want opportunities to increase their revenue generating miles and hours in a week, while still getting their drivers home as planned—which is a big factor in driver retention.

Depending on a carrier’s network, large volume opportunities may sub-optimize their plan and lower yield. With carriers and the entire market so highly optimized, elasticity limits exist for lanes with large spikes or less predictable demand. Remember, offers of high volume do not necessarily bring value to a carrier if the volume is greater than their available capacity in the associated corridor. Carriers want to eliminate the costly overruns associated with repositioning trucks at either the origin or destination.

Key benefits of diversifying your truckload carriers
Many businesses have roughly 80% of their load volume in 20% of their lanes, and likewise 20% of their loads in 80% of their lanes. Addressing the 20% in lower demand lanes and the spikes in high volume lanes often involves adding carriers and 3PLs.

The low elasticity that results when large and medium carriers become increasingly more optimized in their network planning, means shippers need route guides with multiple carriers and 3PLs to successfully find unplanned capacity across the large U.S. carrier community.

Approximately 97 percent of the truckload carriers in the U.S. are small carriers, operating 20 or fewer trucks. And because 91 percent of carriers operate with six or fewer trucks, they can offer significant value to your supply chain:

  • They travel to smaller, niche locations that bigger providers have less tendency to service.
  • They add elasticity to your capacity strategy in dense corridors.
  • They can be added to a shipper’s carrier base to help address lumpy demand and short lead time.

But managing the high number of small carrier relationships to cover your freight volumes might not be possible with your resources. A 3PL is proven to be a market cost and high performance solution for a meaningful percentage of many shippers’ freight portfolios. For example, a large 3PL like C.H. Robinson aggregates 70,000 U.S. carriers into one common experience based on disciplined and automated business processes.

The opportunity to access capacity and minimize price volatility is to think small. Making use of smaller providers enables shippers of any size to introduce elasticity to their shipping and increase their access to available equipment—whether you access those small providers directly or through a 3PL is up to you.

How to diversify your truckload carriers with a 3PL
First and foremost, diversifying your truckload carriers starts by segmenting your transportation needs. Review your freight’s most defining attributes and specific needs, build your carrier base from there, choosing carriers that are most interested in and capable of meeting your freight’s particular needs.

While it may not be practical for you to manage relationships with a large portfolio of small carriers, you can call on a 3PL to help you integrate small carriers strategically into your transportation plan.

Third party logistics providers aggregate equipment, business processes, and price volatility for thousands of small carriers, yet give shippers a single relationship to manage. Processes are aggregated, relationship costs are deferred, and risk is minimized. And 3PLs that work with the growing number of minority carriers offer a ready solution for shippers that have minority supplier initiatives. That generates positive returns for all parties involved.

The bottom line to truckload capacity
As truckload capacity evolves over time, shippers who design a supplier strategy that balances their operations and supply chain needs with market capabilities will obtain the greatest flexibility and performance. The bottom line: a portfolio approach that utilizes large to small carrier communities will deliver best performance and a 3PL is your key to leveraging the small and medium carrier community to help you meet your transportation needs.

Coming soon: watch for the highlights of our latest research. You’ll gain more insights on the strategies leading shippers use to select their asset carriers and providers, and how those practices correlate with obtaining the best truckload performance and rates.

Learn more about the truckload services an experienced 3PL can offer your business.

Comments

Andrew Lockwood

Great post here and very much agree that a mixture of both large and small carriers makes a lot of sense from a diversification perspective.

As a follow-up question, what's a good rule-of-thumb breakdown of large v. small carriers within the mixture at a macro transportation management level? (30/70?)

I know it's a challenge to put carriers into either the large or small bucket, but just interested in your thoughts on the ideal mixture given the fact that 97% of carriers are considered 'small'.

3.28.18

Reply

    Steve Raetz

    Thanks for the comment Andrew.

    Everybody's favorite answer applies here... It depends.

    In a broad market perspective, maybe 80/20 or 70/30 distribution by loads. Meaning that probably 70 or 80% of the loads in many shipper portfolios are likely attractive to larger carriers. The caveat to this however is that there are in fact shippers who have no freight that is attractive to larger carriers and there are shippers whose freight is so constrained to a low number of high demand lanes that a larger carrier community can and will pursue those. It all depends on the freight mix… the attributes of the freight.

    3.28.18

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