Ensure the Financial Solvency of Your Truckload Carriers
The trucking industry has experienced significant challenges over the past few years, and truckload carriers have been operating in an environment with volatile freight rates, an ongoing driver shortage and increased costs. These challenges have placed financial pressure on many in the industry, making it essential for shippers to assess the financial health of the carriers they trust with their freight.
“Trucking is a very capital-intensive industry, and if carriers aren't solvent, they’re not going to be around,” said Alan Lee, vice president of operations for Epes Transport. “Being a customer that's willing to listen to your carriers and enter into a partnership rather than just buying a transactional commodity is important.”
Robert Latimer, senior vice president of operations, truckload, for Penske Logistics, said many over-the-road entities have been operating at a loss to cover some of their costs, but that can't continue indefinitely. "In every truckload cycle, you see capacity exit the market,” he explained.
The Size Difference
Smaller carriers, which make up the bulk of the trucking industry, are particularly vulnerable. “Within the truckload segment, 90% of capacity comes from companies with 10 trucks or less,” Lee said. “Make sure you align yourselves with carriers that have a firm grasp on their costs.”
Tips for Choosing Your Carriers
When deciding which companies to partner with, Latimer recommends that shippers look at an organization’s history and brand reputation.
Review Their History:
“What do the drivers say about the organization and how they're treated? Look at the equipment,” he said. “Are they operating the latest model offerings, investing in safety technology and meeting current industry standards?”
A well-maintained fleet signals financial health and ensures equipment won’t break down over the road, creating service delays. If the equipment experiences a roadside failure, it’s important to work with a partner who can get it up and running quickly or provide a replacement.
At the end of the day, if they're prideful in their equipment, focused on the driver experience and the overall quality of service they provide, then they're going to be more apt to really give that same effort to you, your product and your load," Latimer said.
Carriers’ CSA scores can provide shippers with an indication of the type of equipment a carrier operates, how drivers perform, and their safety ratings, which also contribute to solvency. “It only takes one incident for a carrier to go from solvent to not,” Lee said.
Ask Questions:
Shippers can ask specific questions to obtain more information, such as carriers' operating ratios (expenses divided by revenue) or their prior revenue. “Do they have assets and equipment? Is it owned, leased or rented? Who maintains it? You should also always understand what technology they’re using and the visibility they can give you into your loads,” Latimer said.
Shippers can also ask for information about a carrier's safety programs and insurance coverage. Latimer also recommends asking for references and talking to other customers.
Shippers are trusting carriers with their cargo, reputation and customer satisfaction. "Viewing your carriers as partners will serve you well in the long term," Latimer said. "You want to work with carriers that are stable and going to be able to honor their commitments."
Are you ready to ensure the financial solvency of your truckload carriers? To learn more about partnering with the Epes and Penske teams, call (800) 869-3737.