When sudden disruptions or changes occur in the freight industry, the actions of dozens of stakeholders are put into motion. Shippers seek capacity, brokers find freight, and carriers make themselves available to move goods to market. But as the entire ecosystem adjusts to accommodate sudden deficits in freight capacity, one party bears the financial brunt of these adjustments: shippers. At the end of the day, shippers incur additional costs associated with network disruptions.
Consider the recent closing of the transportation giant, Celadon’s doors. With the perception that there is an overabundance of capacity in the marketplace, brokerage call centers were no doubt firing on all cylinders, vying to move the freight being left on the road. For both carriers and brokers, Celadon’s departure from the marketplace created a competitive playing field for new revenue opportunities, but for shippers, their baseline costs were put at risk.
Though Celadon’s announcement has predominated news headlines, it is only one of many closures to occur in 2019 causing this type of disruption. According to a Wall Street Journal Article, trucking company closures in the first half of 2019 more than doubled all closures from 2018. The looser capacity environment of 2019 is likely the cause of the trucking slow down, as rates became less favorable for carriers. That being said, any time a trucking company closes its doors, new capacity enters the marketplace and both shippers and carriers need to adjust.
Information is based on Federal Motor Carrier Safety Administration (FMCSA) data. The size of each circle corresponds to the number of inspections conducted at that location, giving a general indication of the degree of impact in that region.
In the short term, shippers made decisions to cover the loads left on their dock that were originally planned for Celadon. This is an example of an instance where brokers can provide tremendous value in their ability to quickly and efficiently identify capacity in a pinch.
Once the dust settles, however, shippers will need to appropriately find long-term capacity solutions to bring their networks back into balance.
But Celadon’s sudden closing, among many others in the industry, isn’t an isolated circumstance. Dropped capacity happens even outside of carrier closures – it’s a daily occurrence. As carrier networks change and evolve due to a multitude of reasons (loss or gain of new business, driver time at home strategies, return on capital decisions, fluctuating capacity needs etc.), shippers are often left with three options:
Use a broker to find spot market freight
Leverage their current carrier base, even if their capacity is not the right network fit or the right price
Source new capacity
Options one and two are the most common – and often most easily accomplished. Option three, however, may be the most advantageous route for a shipper, but only if they have the right tools to accomplish it.
In most cases, shippers choose carriers based on a longstanding relationship history or on a small cohort of the thousands of North American carriers on the market that actually gets invited to a bid. Providers scramble to make the freight fit _their _networks. Most shippers wouldn’t know where to start when it comes to identifying new capacity, so options become limited.
Brokers and digital freight boards still require a “middleman” and don’t necessarily create consistency in rate, service, or relationship. All of this contributes to the barrier that exists in finding the best fit carriers for your network – of both new relationships, and old.
Shippers need something to help them identify capacity, without the bias of a middleman that stands to profit off less-than-ideal matches, and that provides direct control over those strategic decisions. Without the need for a major bid event, shippers should be able to strategically target a handful of carriers to establish new capacity. In many cases, the small regional carriers don’t have access to decision-makers at a shipper. Further, shippers are in the best position to know when a change needs to be made in their network, and by using data, can find the opportune time to shift their strategy and quickly solve the problem.
Using an unbiased, third party to identify capacity is a best practice. Leveraging data for the entire transportation ecosystem that includes dynamic networks enables direct access to the right carriers. This creates a stronger relationship between carrier and shipper and creates opportunity for both parties to optimize their network and find the best fit for their freight.
Breakthrough Fuel Recovery manages nearly 60,000 shipments per day throughout North America. We see data across vast networks of nearly 5,000 carriers daily, giving tremendous insights into who is moving freight where consistently.
In the case of Celadon, Breakthrough immediately identified all of the lanes Celadon was assigned to our clients’ consistent freight. Both internal and external data points informed our recommendation of 5-10 diverse carriers to our clients to proactively contact for potential matches. Using our proprietary algorithms, data history, and freight characteristics, we are also able to provide targeted rate recommendations that were quite different from when the freight was originally awarded.
Using a prescriptive method of identifying capacity solutions and rate guidance creates a more data-driven conversation between shippers and carriers. By leveraging vast networks of providers, shippers also have the confidence that they can make a more informed decision on capacity and negotiating a rate to match the service. This certainly beats the email blast to all of your providers asking for rates and trucks, ultimately putting you at the mercy of the market.