Tag: Contract Freight

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.