Truckload / Intermodal: How to Get the Most Capacity within Budget Blog Feature
Rick LaGore - CEO InTek Freight & Logistics

By: Rick LaGore - CEO InTek Freight & Logistics on April 20th, 2018

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Truckload / Intermodal: How to Get the Most Capacity within Budget

Intermodal | truckload | diesel fuel price | Freight Capacity Challenges

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The timing could not be better to take a deeper dive into the 53' capacity market, as shippers across the USA are challenged on finding capacity and at a competitive price.

This blog is written to frame a strategy to address the challenges head on by looking at the characteristics of the 53' capacity market.  

Characteristics of truckload and intermodal 53' capacity:

  • Highly Fragmented Market

    • The truckload market is made up of roughly 600,000 for-hire-carriers and another 750,000 private carriers.  While the big national asset carriers are front of mind, 91% of the registered carriers operate 6 or fewer trucks and 97% percent operate fewer than 20 trucks. 
      • The fragmentation makes it difficult for shippers to access all the potential available capacity making diversification.  The key for success is a mix of small to large asset truckload carriers, intermodal providers, then supplement additional capacity needs with a non-asset freight broker.
        1. Large carriers operate their network on balance and consistency. 
          • Their pricing is typically the most compelling because the lanes they quote are based on balancing their network by feeding empty mileage routes within their network to increase yield.
        2. Medium and small carriers tend to operate more niche lanes and more intensive requirements.
          • This group is a great resource to augment capacity on heavier lanes or through demand peaks.
        3. Intermodal brings capacity and price for specific lanes
        4. Non-asset providers, better known as freight brokers, have a way to efficiently tap into capacity within current market conditions to supplement a shipper's daily capacity needs.  The key is to align with a freight broker that has at least 25,000 under contract and active within their system.
          • A quick note.  Do not employ a multitude of brokers.  The reason is the unintended consequence that often occurs is the lane is bid, as multiple brokers tap into the same assets in the market.
  • Capacity is a Fluid

    • Capacity is in continuous flux because of economic factors, seasonal trends, weather, disasters, etc.  As the various forces influence the freight traffic patterns, some markets become short of capacity while others have excess capacity.  There is no time when the market is completely balanced, as the changes in capacity are constant. 
      • When capacity is tight in a particular lane, shippers pay more as they have to go deeper into their routing guides and tap into the spot market when the routing guide is exhausted.  
  • Freight Movement is Not Easy

    • Think of it this way.  Most, if not all of us have experienced delays in their airline travels.  The freight commercial airlines move, people, go to a finite group of pick-up and delivery airport locations, which facilitates efficiencies within the commercial airlines to service less than 200 domestic airports a day.  Now, think of the 53' capacity market.  Here is a highly fragmented base of carriers that is asked daily to hit an infinite number origin / destination addresses.  In some cases, three is not even addresses.  Also, the 53' market is a single thread route on highways or railroads.  The point is truck and train routes do not have the opportunity to take advantage of a three dimensional route (elevation) to avoid road and/or rail congestion.
  • Three Alternatives to 53' Capacity

    • The front of mind choice for capacity for the majority of shippers is truckload.  Other 53' capacity alternatives include 53' domestic intermodal and LTL. 
      • As ecommerce continues to draw upon LTL in a bigger way, this option is becoming less of an option.
      • Many shippers are still missing out on 53' domestic intermodal capacity, as there is still a belief  intermodal capacity can only be found in 20' or 40' containers.
  • Contract Rates Almost Always Beat Spot Market Pricing

    • freight contractsThe spot market is based on current market conditions and need.  The best price is not had when one is over a barrel and they have to make a purchase. 
      • The spot market should be utilized to supplement contract capacity, not be the lead for capacity needs.
  • There is More to Freight than a Rate

    • Freight RFP's are designed to be exercises in how to bring specific origin-destination freight rates to the lowest number possible.  Pay attention to accessorials and quality of service. 
      • Many times the sparkle of an RFP rate is penny wise and pound foolish.
  • Specific Rules and Regulations

    • Both asset and non-asset freight providers operate within specific laws that may seem cumbersome to some is meant to protect shippers and the general population. 
      • Shippers need to understand the general regulations, then study up on the laws that relate to their industry.
  • Be Transparent

    • The more transparent a shipper can be about its business the better.  Carriers can best figure how to optimize their network when all the facts are provided.  Many times the facts have some liberties around them, which can either improve the rate temporarily or make it worse. 
      • If the facts are stretched in favor of the shipper, the carrier will most certainly come back for a price change. 
        • On the flip side, if the pricing is favorable to the carrier, then the assumption the carrier typically makes is the freight is on board their trucks because they were the lowest priced option so no need to make a change.
      • Under volume assumptions, do not assume more is volume is better.  Many times, more means more expensive. 
  • Competition

    • Shippers need to understand their competition, as it relates to buying 53' capacity, is not companies that have competing products.  Their competition is every shipper needing capacity on the same lanes their freight is moving through daily.
      • Under this thinking, shippers need to make their freight and origin and destination locations more carrier friendly than their competition. 
        • Shippers frequently hear the words "carrier freindly", but this is one to listen to.  Carriers will blackball locations and refuse to be a part of any solution if they consistently have issues with a particular shipper's freight.

The last point to consider in the freight optimization equation is outsourcing freight activities.  Managed transportation solutions are one of the hottest areas within the logistics market.  By outsourcing the freight function, shippers can focus on what gives them a competitive advantage while employing a top outsourced program will bring in better technology, processes and expertise that would otherwise not be available.  More will be written on outsourced freight solutions in later blogs, but for now visit the following link on managed transportation solutions.

For more on 53' domestic intermodaltruckload and managed transportation services, please sign-up for our weekly blogs and visit the InTek Freight and Logistics website.

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