How to Fix the “For-Hire” Truckload Industry

As most of you know, full truckload (I refer to it as just “truckload” in the rest of the article) is a mode of freight for larger shipments that typically occupy more than half and up to the full capacity of a 48′ or 53′ trailer. According to the American Trucking Association, the US Full Truckload market is approximately $600 billion ($350 billion handled by for-hire fleets, $250 by private fleets).

I’ve always viewed the truckload industry as a commodity. It’s stable, efficient, and the markets treat service as nearly equivalent without regard to which company provides the service. For me, this represents an excellent opportunity for innovation.

The purpose of this article is to highlight 3 of the major opportunities to both improve service and reduce costs in the for-hire full truckload industry. These include: shipper over shopping freight, lack of quality information, and service mismatch. In our estimate, if we were able to resolve these challenges shippers, carriers, and brokers would enjoy a $50 billion, or 8%, reduction in direct and indirect costs. Let’s get started.

Shippers Over Shopping

Many shippers and brokers believe it’s possible to lower cost and improve service by including MORE carriers in the quoting process.

Shippers will email out an opportunity (or post to a bid board) to 10 to 100 different providers in order to receive a quote with the goal of selecting the lowest price carrier that can still make service. Surprisingly, our experience is that the service-to-cost ratio is actually improved when using fewer carriers (three to five) where the freight requirements better match the service requirements of the carriers.

By tightening up the quoting process to those carriers that can “truly” provide service, the industry would enjoy the reduction of millions of hours of wasted time quoting on freight that they don’t really want, freight where they cannot make service, or freight where they will be uncompetitive.

Lack of Information and Misinformation

We all know there is a lot of bad information in the truckload industry. All participants play a role in this issue. Whether it’s the lack of information from the shipper (true weight, dims, commodity, freight availability, etc.) or carriers/drivers that are not being quite honest (capabilities, location, ETA, etc.).

This cloud of uncertainty can cause all sorts of issues throughout the process; usually leading to safety issues, additional expense, or pick-up/delivery times being compromised.

At Revolution, our Carrier Excellence Program includes a Key Metric, Ease of Doing Business. This metric is both qualitative and quantitative.

The quantitative component measures the number of times a carrier deviates from the process. The qualitative component is handled through monthly internal surveys with the individuals that “cover loads” and deal directly with the carriers/drivers. They rate “honesty” on a scale of 0 to 10. This information is then fed into our TMS and carrier selection process for a given shipment to ensure those carriers that are “less honest” move down the “pecking order” leading to fewer loads.

Service-Price Mismatch

I’ve always said that not all freight is created equal. The freight might be the same but the end-customer is new or is an important client. The freight might be the same but the pickup or delivery locations are different (busier shipper or consignee location, more remote, etc.). The freight might be the same but it’s paramount to get the freight off the dock by a certain time in order to book revenues for the quarter (time or speed).

There are many other reasons, but you get the point. These slight differences cause the shipper to need different/additional services or superior performance than the traditional requirements. Unfortunately, shippers always want a higher level of service but do not want to pay the required premium. In short, they want the Mercedes service for Yugo prices. To meet this requirement, carriers and brokers are forced to do one of four things: reduce margins, cut corners, compromise service, or flat out lie to the shipper. All are bad.

At Revolution Trucking, we have come up with a solution to resolve this disconnect. We call it Service Select^©.  Service Select^© is a new and proprietary offering that matches the shippers service requirements to a specific carrier and even a specific asset or driver. Service Select^© has 4 service levels with increasing price: economy, standard, premium, and guaranteed, each of which have a different level of service expectation.

Based on our data, approximately 80% of full truckload freight still goes Economy and Standard, which is no surprise; however, the other 20% is equally split between Premium and Guaranteed. Guaranteed service is very similar to the dedicated ground expedite market – a market that has been getting diluted over time.

This more refined segmentation allows shippers to “buy-up” or “buy-down” based on the specific needs of that shipment and get the proper carrier match. More choices for shippers both add efficiency and improve service. A good thing.

Conclusion

I put all three of the challenges listed above in the “being lazy” category. All parties involved can do better, but deadlines, stress, and concerns of losing a shipment/customer force us to compromise our brand promise. Unfortunately, cutting corners leads to all forms of downstream supply-chain issues and ultimately the various parties start blaming each other when the freight doesn’t arrive in good condition, on-time, or at the quoted price.

A wise professor from the University of Chicago once told me that when a business takes on the task of changing industry norms that you should expect an uphill battle, regardless of who benefits and by how much. Like people, most industries abhor change. At www.revolutiontrucking.com we are up for the challenge. We want to be known as the company that spearheaded innovation in a massive industry rooted in its ways.

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