The question itself is provocative, but ultimately absurd.
A recent editorial posted on FreightWaves by a broker-based technology company posited the question: “Are small truckload carriers worth saving?”
The thinking, according to the author, is that small carriers have never fully recovered from the “Great Recession” of the late aughts, and are now in even greater peril because of the Covid crisis, which has turned the spot market into a roller coaster of rising and falling rates and capacity.
Additionally, rising insurance costs – including a proposal to raise minimum liability coverage requirements from $750,000 to $2 million – also poses an existential threat to many carriers, according to the author.
“If this change is approved, the premiums for this coverage could increase by 300% or more.”
Regarding the spot market, the editorial states:
“One reason for their concern, is that during the [Covid] shutdown, small truckload carriers found fewer loads available in the spot market. As a result, the rates paid for these loads often dropped below the carriers’ cost to operate their trucks. This created an even bigger rate gap with larger carriers, who are paid higher rates because they’re able to provide guaranteed coverage of their shippers’ loads.”
These points have merit, and solutions are certainly needed. But to question whether small truckload carriers are worth saving is – essentially – meritless.
Small Trucking Companies: Essential to U.S. Economy
The simple fact is this: 97% of truckload carriers are small and independent, owning just a handful of trucks. The mere suggestion that small, truckload carriers may not be “worth saving” is ludicrous. These small carriers are the economic backbone of the American economy. The country would collapse without their presence and persistence. Consider that they are already hauling much of the freight moved today – often through a process known as “Purchased Transportation” – whereby large carriers outsource their excess freight to the small “mom and pop” shops while taking a healthy margin off the top. It’s the same story for truckers running broker-based loads. Freight brokers consume margins ranging from 15-50%, cutting deeply into the profit potential for small carriers.
So what – or who – will “save” these small and independent carriers?
The answer is a Brokerless Direct Network that puts power back in the hands of small carriers and removes $200 billion worth of managed fees and inefficient processes.
LaneAxis has built such a system – the first-of-its kind “Brokerless Freight Network.”
“Freight brokers and large carriers have completely steamrolled small trucking companies,” says Rick Burnett, LaneAxis CEO & Founder. “Burdensome regulations and soaring insurance costs aren’t helping – but the heart of the problem lies in the lack of a shipper-direct network. The technology and processes LaneAxis is putting in place will level the playing field for these small carriers, giving them a chance not just to survive – but to thrive.”
The LaneAxis Network: Profit-Building and Cost-Cutting
The LaneAxis Direct Network features numerous profit-building and cost-cutting features that could buoy the entire small carrier industry. Most significantly:
- No more brokers. So on a $1,000 load – a broker might take 20%, leaving only $800 for the carrier. LaneAxis does not take a margin off the freight payment (minus a small transaction fee). That’s a savings of almost $200 per load – potentially adding up to thousands of dollars of additional revenue per year.
- Guaranteed direct payment, usually released 24 hours after delivery. This means no more “factoring” – or paying a third party firm yet another commission to provide immediate payment instead of waiting the typical weeks or sometimes months it takes to settle an invoice.
- A free fuel card offered in partnership with the American Association of Owner Operators (AAOO) that offers average savings of $.42 cents/gallon – potentially amounting to thousands of dollars saved per year.
- The ability to connect to and negotiate rates directly with shippers via the network portal, then manage the entire shipment in real-time via the FreightVISION driver app, which is tied directly to the portal. This could dramatically reduce overhead costs for carriers, while providing shippers the transparency and trust they demand.
These four factors alone could increase profit margins for small carriers by thousands – and potentially tens of thousands of dollars per year.
All 1.6M Carriers in the LaneAxis Network database can potentially connect directly with hundreds of thousands of shippers.