In the first portion of this two-part blog post regarding my arguments on how freight shipping is not a commodity, I focused on the service side of things and the people and team dedicated to providing additional value on a company’s freight moves. In this section portion, I wanted to address the latter half of of the definition of a commodity regarding fungibility. “A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them.” I’d like to relate this concept of fungibility to the LTL freight carriers directly. Unfortunately the viewpoint is all too common that all of these carriers are essentially created equal. Trucking companies are not commodities. These carriers simply move your freight from pickup to destination and the major difference between the carriers is the freight quote variance depending on the lane serviced or type of goods being moved. This may be the perception, but the reality is startlingly different. Its an unfortunate fact that quality information about the LTL carriers is difficult to find online. There are several reasons for this lack of information related to LTL carriers and their service. For starters, many carriers perform at greatly inconsistent levels depending on the lane being serviced or the type of freight being moved. We have some carriers in our system that perform amazingly well for certain customers, and very poorly for others. This could be due to management at a particular terminal, capacity (shortages or overages), the route that a customer is on, etc. We have our own internal scoring system for carriers, and there are many times where the worst performing carriers are some of our customer’s favorite to work with. They’ve just had quality experiences with them and have no reason to look elsewhere. Othertimes, we’ll run into potential customers that “hate” a carrier or two that we love working with internally and have had great success across our system with the thousands of shipments we move each month. The other major reason that there isn’t a lot of transparency related to the carriers and their offerings, at least from the broker side of things, is that a broker has to be very careful about maintaining the quality of the relationship with each of the LTL carriers that they choose to work with. Unlike truckload shipping, where there are tens of thousands of carriers out there, the LTL side has 50 to 60 legitimate carriers to work with. Of course, a quality broker will stop working with a carrier that is truly an awful partner from a service level perspective, but there probably not going to issue a press release espousing the reasons they are no longer working with a carrier. Nor am I going to write a blog post publicly listing our scorecards for the different carriers. A web search will typically only produce some lists of LTL carriers listed by revenue, and almost no qualitative information. The reality is, that different LTL carriers work better for some customers than others. What’s the solution? Talk with your broker or a potential broker about your freight and get really detailed about what’s important to you. We have certain carriers that are awful about on-time deliveries, but they might cost 20-30% less on average. Some freight isn’t time sensitive, and if yours fits that bill, then one of those carriers might be a great option for you. We have other customer’s whose freight is so critical that one day of delay can cost them hundreds of thousands of dollars. So we have to figure out the best mix of carriers that service their lanes at the highest on-time percentage as possible. After giving the detailed input about your freight requirements to your broker, they can select a proper carrier mix for your freight, and then most importantly, carefully monitor the freight shipments they are moving for you and add/subtract carriers as appropriate. Beyond just on-time delivery, a reputable broker will be able to analyze how many pickups are missed, what % of shipments are getting additional charges, what carriers service your destination locations each day of the week, and how many claims are being generated by the carriers you are choosing. Setup your own internal scoring system if you don’t use a broker that can do these services for you. Here’s a great article on some of the things to think about. By working with a broker that throws that fungibility argument out the window and realizes that all carriers are definitely not equal, and more importantly that each carrier individually is going to operate differently for each customer, you can really get the benefit of a consultative approach to maximizing the efficiency of your freight shipping and align your company’s goals with carriers that can meet or exceed them.
Chris is the president and founder of FreightPros. Chris has been involved in the transportation industry for over ten years and focuses on strategy and new business initiatives to help drive FreightPros to become the most progressive freight broker in the industry.
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