4 Years After LaneAxis Study, Freight “Outsourcing” Still Weighing Down Industry

4 Years After LaneAxis Study, Freight “Outsourcing” Still Weighing Down Industry
Controversial Purchased Transportation practice hinders true visibility and direct connectivity

It’s long been trucking’s “dirty little secret” – although for industry insiders it’s hardly a secret at all.

Four years ago, a widely shared and discussed LaneAxis report revealed that the country’s biggest publicly-owned trucking companies outsource, on average, over 42% of their freight to small Carriers and owner-operators – a practice known as “purchased transportation.” When this happens, most shipping companies contracting with the “big boys” have no idea that small mom-and-pop Carriers are the ones actually hauling their freight. This is commonly referred to as a “double-brokered” load.

Fast forward to 2020, and most of the companies on that list are still at it.

Take JB Hunt for example – the third biggest trucking company in the U.S. In 2016, after evaluating publicly available filings, we reported that JB Hunt spent roughly 48% of its annual revenue on purchased transportation.

Four years later that number hasn’t changed a single digit. Per its most recent public filings outlining its 2020 Q1 and Q2 financials, JB Hunt is still spending exactly 48% of its $2 billion+ operating revenue on purchased transportation.

Meanwhile, Landstar Systems – the fourth biggest trucking company in the U.S. – just announced it spent 92% of its revenue in Q1 2020 on purchased transportation (or as the company calls it: “BCO” – Independent Business Capacity Owners).

These two trucking titans are hardly alone in committing so much capital to a process that can thwart true Shipper visibility while cutting profits for independent Carriers.

FedEx, for example, now commits a full 25% of its cash to purchased transportation.

“A quarter of FedEx’s total expenditures goes toward purchased transportation, which includes the costs of services purchased from contractors,” reports Forbes. “This figure has been going up for the company over the last few years, as it partnered with third party vendors to meet the volume growth. In fact, it is even higher than that for its peer, UPS.”

Forbes says UPS spends about 20% of its total expenditures on purchased transportation.

Lost Visibility for Shippers AND Consumers

In the cases of FedEX and UPS, when freight is outsourced it’s not just shipping companies losing visibility, it’s all of us – the consumers losing visibility. Consider that Amazon itself outsources much of its freight to UPS and FedEx (in addition to independent carriers). So if UPS outsources a shipment that Amazon outsourced to them, real-time package visibility is often gone. How many times have you clicked a tracking link from UPS, FedEx or Amazon, only to realize your package is currently residing somewhere in freight purgatory? No one seems to know where your package is, and two-day delivery promises are often shattered.

LaneAxis CEO Rick Burnett expounded on the problem in the company’s original report: “Our findings are clear – many Shippers likely aren’t getting the visibility they think they are,” he explained. “Large Shippers and Carriers may be able to manage their own fleets effectively, but with so much freight being outsourced to small Carriers with six trucks or less – which is 97% of the trucking industry – that’s a problem. There’s very little visibility into that network.”

In essence, these massive Carriers and delivery companies are serving as de-facto freight brokers, which is exactly what LaneAxis seeks to eliminate. FreightLINK by LaneAxis now gives Shippers the ability to deal directly with the very same small Carriers that are already hauling their freight – often surreptitiously – via purchased transportation.

Squashing the Status Quo

In trucking, the more things stay the same, the more they tend to stay the same. That’s because the status quo benefits too many big players.

LaneAxis is focused on squashing the status quo. Purchased transportation adds an extra layer of inefficiency, cost, and diminished visibility that must be eliminated.

LaneAxis has long had an accurate pulse on the heartbeat and inner-workings of the trucking industry. It’s a major reason our Shipper-to-Carrier direct solution is resonating with so many across the freight transportation landscape.

To learn more, visit Laneaxis.com.

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Shippers Brace for a Covid Christmas

Shippers Brace for a Covid Christmas
How Joining a Direct Freight Network NOW Can Prevent Supply Chain Nightmares Later

Well, 2020 has certainly been an interesting year.

On the business front, the swirling storm of a deadly pandemic, geopolitical tensions, and general unease has many companies struggling to maintain steady footing amid all the chaos.

So what happens now that the holidays are here?

Wait. The holidays are here? In August?

For manufacturers and other companies that move freight, they most certainly are. August is when retailers and other Shippers start ramping up production and putting holiday logistics plans into place. It’s also the beginning of the traditional peak season for the trucking industry.

Of course very little has been “traditional” this year – which has Shippers and Carriers alike struggling to read the tea leaves as they plot out their holiday logistics strategies. Will the usual freight surge take place this year? Or will Covid cripple holiday spending, which for retailers can represent as much as 30% of annual sales?

Apart from a guaranteed economic spike, the best gift Shippers and Carriers might receive this year is the birth of a direct freight network such as the one LaneAxis is building. FreightLINK AND FreightVISION are designed to help companies effectively and efficiently maneuver through times of supply chain uncertainty. And in “trying times like these” – uncertainty is about the only constant.

Just looking back to last Christmas, it wasn’t Covid, but another big “C” – Celadon Trucking – that threw a wrench into the holiday freight season. Just two weeks before Christmas, 2019, the Celadon Group – at one time a $1 billion company – unexpectedly filed for bankruptcy, marking the largest truckload bankruptcy in history. In addition to 3,000 drivers instantly losing their jobs, Celadon’s collapse left many of its high-profile customers scrambling to find capacity just before Christmas. That list included corporate titans such as Target, Walmart, Proctor & Gamble, Alcoa, General Electric, John Deere, and Philip Morris.

Those massive companies undoubtedly had the clout and cash to power through the disruption using a variety of “Plan B” tactics – most likely reaching out to freight brokers and 3PLs. Fortunately, LaneAxis is now on the scene to serve as a Plan A, B, and C.

Capacity at Your Fingertips

The ability to tap into a vast network of on-demand Carriers at a moment’s notice is indispensable. By directly connecting with hundreds or thousands of Carriers that run their preferred lanes, Shippers of all sizes are not only mitigating risk, they are now empowered to completely reinvent their logistics strategies with efficiency, cost-savings, and total visibility at the forefront.

It’s important to remember that 97% of the U.S. trucking industry is comprised of small and independent Carriers owning just a handful of trucks – in many cases just a single truck. So when Shippers scramble to find capacity through a broker or 3PL, those loads are almost certainly being hauled by the very same Carriers LaneAxis is now offering direct access to. During times of calm or chaos, LaneAxis is eliminating the need to utilize intermediaries such as freight brokers.

With FreightLINK, a Shipper can now have hundreds, or thousands, of independent Carriers all under contract – with insurance, Worker’s Comp, and all other contractual requirements managed and monitored by the LaneAxis system. Once a shipment starts, FreightVISION then automates management of the actual movement by providing real-time tracking, geofence entry and exit notifications, in-app messaging, and instantly uploaded e-docs including proof-of-pickup and delivery. Once all parties sign off on the delivery, payment is automatically released to the Carrier. In this year of unprecedented uncertainty – LaneAxis can bring some holiday peace of mind to Shippers. Remember – in the world of freight logistics the holidays are already here. If Shippers/Manufacturers truly want to weather any supply chain storms come Christmastime, they should start building their independent Carrier network NOW. To find out more, visit laneaxis.com.
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Shipper to Carrier Direct: Avoiding Unnecessary Detours

Shipper to Carrier Direct: Avoiding Unnecessary Detours

LaneAxis is in the business of connecting Shippers directly to Carriers by creating the first of its kind “brokerless” freight network.

It’s a fairly simple and powerful concept – so why hasn’t it been done before?

Shippers and Carriers have always had the freedom to sidestep third parties – such as freight brokers – and do business directly together. But there are plenty of potholes to navigate when taking this detour.

Historically, Carriers have avoided sidestepping brokers because they don’t want to damage fragile relationships that could cost them ongoing freight opportunities. Shippers have stuck with brokers because they don’t want to deal with the hassle of finding qualified Carriers, then having to manage the contractual relationships and real-time load management that is incredibly time and labor intensive. For Shippers that move hundreds, or thousands, of loads per week – it simply doesn’t make operational sense.

LaneAxis: No Detours Required

LaneAxis is now changing the paradigm and perception of how a direct model can work, but occasionally we’re still asked a blunt but fair question: what’s to stop Shippers and Carriers from joining the LaneAxis Network and striking “side deals” after making that initial direct connection? After all, we are building a database of 1 million+ Carriers and 1 million+ Shippers. Seems like a simple workaround, doesn’t it? Not really.

Simply put, it would not make operational, financial, or frankly, logical sense. The plethora of benefits offered by FreightLINK and FreightVISION is simply too great to ignore. First off, there’s the cost factor. Consider that on a $1,000 load, a broker would generally take about a 20% commission, which means $200 gone from the Carrier. In the LaneAxis model, the Carrier not only gets the full $1,000 (minus a small transaction fee), but the payment is also guaranteed, and will usually be issued within 24-hours of delivery. Currently, it can often take weeks, or months, for Carriers to get paid – and that payment is not guaranteed. Many turn to “freight factoring,” a process in which Carriers pay a third party 5% or more of their contracted rate to get paid immediately. So on a $1,000 load, that’s another $50 gone.

Carriers would also still need to utilize the LaneAxis network to avoid empty backhauls – known as “Deadhead” miles – which costs Carriers millions of dollars per year. And detention time disputes – which cost Carriers BILLIONS per year – will be virtually eliminated thanks to LaneAxis’ time-stamped, verifiable data. LaneAxis REQUIRES Shippers to pay detention fees to Carriers after two-hours spent waiting at a dock.

Further, LaneAxis is focused on the 97% of U.S. Carrier companies that own just a handful of trucks, and in many cases, only one truck. Most of these Carriers lack the technology to satisfy the needs of most Shippers. That’s why the current system is still bogged down by brokers, phone calls, emails, and even faxes. This is a big reason small Carriers have so much trouble obtaining Shipper-direct freight. With LaneAxis, all of that is history. Small “mom-and-pop” Carriers now have the ability to compete with mega-Carriers and avoid brokers by providing real-time tracking, instantly uploaded e-docs including proof-of-pickup and delivery, geofence alerts, and much more. Given that the only per-load cost for Carriers is a 1% payment transaction fee ($10 on a $1,000 load), why in the world would a Carrier want to lose all those benefits – just to save $10?

On the Shipper side, it’s frankly also a no-brainer to use the LaneAxis platform for every single load. It all comes down to risk/reward. Most Shippers have to maintain numerous contractual relationships with many trucking companies, so doing “one-off” deals with multiple Carriers is both risky and time-consuming. Shippers are free to join the FreightLINK network and make unlimited connections with Carriers. The only per-load fees are a $5 FreightVISION fee, and the 1% payment transaction fee. So again, on a $1,000 load, the Shipper’s grand total spend is $15. Why would they sacrifice the security, automation, convenience, and transparency LaneAxis provides – just to save $15?

Remember, LaneAxis requires Carriers to upload valid insurance certificates, Workers Comp verification, CDLs, and other necessary documentation, as well as requiring them to accept the Shipper’s contract. The LaneAxis system monitors renewal dates, instantly archives shipment documents (leading to simplified accounting), and automates numerous processes such as load-tracking that a Shipper would have to pay a dispatcher or other office employee to handle. That adds up to massive overhead. Shippers also gain the benefit of actionable data, such as a Carrier’s on-time performance, average wait times at docks, and more.

So again – why would a Shipper want to lose all those benefits just to save $15?

Remember, LaneAxis is not just about direct freight opportunities, it’s about risk mitigation, process automation, load-level transparency, and expansive network connectivity. FreightLINK and FreightVISION represent a fundamental shift in trucking logistics that benefits Shippers and Carriers equally.

So yes – in theory – Carriers and Shippers could simply “exchange numbers” and deal direct – but they would do so at their own peril. Any objective – or subjective – risk/reward assessment would almost certainly conclude such a strategy simply doesn’t make sense.

To learn more about the LaneAxis Direct Freight Network, visit www.laneaxis.com.

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A Contract Hit – How Shippers Can Avoid Costly Long-Term Carrier Deals

A Contract Hit – How Shippers Can Avoid Costly Long-Term Carrier Deals

When Shippers need to move freight on a truck, determining the most cost-effective way to do so is often a guessing game – if not a pure gamble. This is particularly true for mega companies – think Walmart – that move millions of loads per year.

Shippers generally have two ways to pay trucking companies to haul their freight: either commit to long-term contractual rates, or rely on the economic whims of short-term spot market rates, which can be impacted by any number of factors – including global pandemics.

Walmart owns roughly 6,000 trucks and 60,000 trailers, making it one of the largest private fleets in the country. But even the biggest company in the world outsources much of its excess freight to brokers and large Carriers on a long-term contractual basis, and they’re not the only ones. What many of those companies don’t realize is it’s actually the “little guys” moving much of that freight.

A 2016 LaneAxis study created major waves by revealing that the biggest trucking and logistics firms in the country secretly outsource an average of 42% of their freight to small “mom-and-pop” independent trucking companies – a practice known as “Purchased Transportation.”

Translated: many Shippers are simply more comfortable securing long-term capacity at fixed prices to ensure peace of mind and cost predictability. But what the LaneAxis study exposed is that many of the transportation companies they’re contracting with are themselves relying on the fickle spot market to move those loads, often for far less than the original contracted rate.

So who loses at the end? Both the Shippers AND the small independent Truckers who are actually hauling the freight. Who wins? The mega-carriers and logistics companies collecting hefty sums to play ‘middleman.’

Shippers lose by generally overpaying to secure that long-term capacity, while unknowingly losing real-time visibility over their freight. The small, independent Carriers who actually move the loads lose by having those behemoth intermediaries shave anywhere from 20-50% off the total amount they should rightfully be earning.

This is just one of numerous supply chain inefficiencies and questionable practices exposed over the last few months by the COVID-19 crisis.

But as with many aspects of life post-pandemic, a “new normal” is taking shape in the supply chain – and LaneAxis is leading the way. The company’s FreightLINK Shipper-to-Carrier Direct Network is eliminating the need for Shippers of all sizes to utilize costly intermediaries or commit to risky long-term contracts.

By connecting Shippers directly to Carriers via a vast and dynamic on-demand transportation network, the two sides can negotiate rates fairly and directly via the LaneAxis platform. Both sides will make and save money by cutting out mega-intermediaries and the mega fees they consume. Shippers are now empowered to build a vast independent carrier network that will virtually eliminate capacity concerns regardless of market conditions. That’s because they now have the ability to connect with hundreds of thousands of small trucking companies they never knew existed, and who are all now vetted and visible inside the LaneAxis portal.

Further, LaneAxis’ FreightVISION platform ensures complete transparency and trust over all freight movements by providing Shippers real-time tracking, e-docs, proof of pickup and delivery, and much more. Small Carriers, in turn, will receive the full and fair payment they’re entitled to – and generally receive it in 24 hours via the FreightVISION payment gateway. Currently independent Truckers often have to wait weeks or even months to get paid after a shipment is complete.

Bottom line: going direct via FreightLINK virtually eliminates the need for Shippers to enter into long-term contracts with giant transportation companies. It also frees both Shippers and Carriers from relying on costly and clumsy broker-based load boards to connect.

It’s a true win-win for both Shippers and Carriers.

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