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Freight Shipping: Not a Commodity (Part 1)

CC image courtesy of Simon Cunningham via Flickr

Over the past year I’ve met with multiple Presidents of other freight brokerages and have had heard the same theme ringing through regarding freight services as a whole. That the services we provide for people’s freight are essentially a commodity.

One President told me something along the lines of, “We’ve accepted that LTL freight shipping is a commodity and we treat it as such. We just give the lowest pricing possible to our customers and let them handle the service side of things.”

I couldn’t disagree more with this viewpoint, however I do think many shipping customers in the marketplace may view freight shipping, and particularly the LTL side of things as a commodity because they’ve not yet worked with a broker that has provided services and delivered soft-cost savings that they didn’t realize were even an option.

Let’s grab a definition of a commodity (pulling from Wikipedia here, which I’m sure was pulled from somewhere else), “It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. 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.”

Tackling the first part of the definition, we know there is huge demand for freight services, literally hundreds of billions of dollars of domestic US transactions each year. The crux of the commodity argument is that these services are being supplied without qualitative differentiation across the market.

From an outsider’s perspective or from a shipping customer that hasn’t worked with a service oriented broker or carrier this may be the case. Its logical to think that a truck is going to move your goods from point A to point B, and in a relatively standard amount of time.

In fact this is usually the case. However, there are so many working parts that go into each freight transaction, that we as brokers are given the opportunity to shine and add extreme value to the customer who’s goods are moving in that transaction, that the commodity argument starts to fall flat on its face.

And only at a point in time where all brokers and carriers are going above and beyond and delivering the maximum amount of soft-cost savings, will the commodity argument truly fly.

Logan, from our account management team, is a few days away from releasing a series of blog posts on what services a quality broker should be supplying to its customers, so I won’t go into extreme detail on each of these, but if you are moving your goods and not receiving the following services from your carrier or broker, you are in fact choosing an inferior level of service and if your freight decisions are based purely on price, then you might be making the mistake of treating freight as a commodity:

  • Online Freight  Quoting Automation and Transit Time Estimates from Wide Diversity of Carriers
  • Pickup Tracking
  • Delivery Tracking and Delay Notifications and Resolutions
  • Billing Auditing
  • Consultative Freight Optimization Services
  • Carrier Scoring
  • Engaged Sales/Support/Account Management Team

Touching on the last bullet, I think its so important that the broker or carrier servicing your freight absolutely does not view a freight shipment as a commodity. An engaged team that is constantly trying to refine your shipping processes, create efficiencies, or unlock areas of potential savings for a shipping company is critical to the successful relationships of the two parties, otherwise you run into a potential situation where the customer is actually viewed as a commodity. If a team is viewing a company’s critical freight shipment as just another shipment moving from point A to B, then service will suffer in the long run.

In part two of this post, I will talk about fungibility and how not all carrier’s are created equal.


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