“It goes back to the shipping needs of individual customers,” said Alan Lee, vice president of operations for Epes Transport. "It depends on what you're shipping, what size shipper you are and how susceptible you are to market conditions."
A diversified carrier strategy involves working with multiple truckload providers. For shippers, diversification can provide greater flexibility, increased resilience and leverage for negotiating rates. "There are advantages to not having all of your eggs in one basket," said Robert Latimer, senior vice president of operations, truckload, for Penske Logistics.
While diversification provides flexibility, consolidating truckload carriers can create operational efficiencies and cost savings.
Developing the Right Strategy
Since the ideal strategy is highly dependent on each shipper's operations and needs, Lee recommends that shippers evaluate their strategy regularly and not just when the market fluctuates. "It tends to be reactive rather than proactive," he explained.
Shippers should consider several key factors when determining their ideal mix of carriers, including the following:
Access to Capacity: Access to capacity is a critical factor in supply chain success, making carriers' size, reach and scalability essential considerations when choosing a carrier. A strong partnership with a single carrier can lead to priority treatment, as shippers who consolidate more business with one provider may gain preferential access to equipment, drivers and service. However, relying too heavily on a single carrier also carries risks, especially if the carrier doesn’t have a broad reach.
At the same time, a diversified carrier network can help companies avoid disruptions caused by a single carrier’s failure, capacity shortages or service issues. “The wider you cast your net, the more options you have. So, if you've got multiple requests to a variety of different carriers, you may be more likely to fulfill your obligations,” Lee said.
Carriers also need to be able to scale if shippers’ demand increases, whether it is from season surges or unexpected spikes in volume. “If you have cyclical surges, whatever your carrier base looks like, you want to make sure that they have the ability to support your needs during expansion or contraction during those seasons,” Latimer said.
Carrier Reliability: Carrier reliability is another critical factor in shippers’ decisions to consolidate or diversify. If a carrier consistently meets service expectations, shippers may benefit from consolidating shipments with that carrier. Shippers should consider a carrier’s financial stability, on-time performance, network coverage, capacity and availability. Other considerations include a carrier’s regulatory compliance, safety record and CSA scores.
Competitive Pricing: In truckload shipping, cost tends to outweigh other factors when shippers select carriers. Shippers that do more business with a single carrier may be able to take advantage of volume-based discounts or long-term pricing agreements, resulting in better rates.
However, when multiple carriers are competing for business, shippers can leverage market dynamics to take advantage of more competitive rates.
Service Needs: By concentrating freight volume with fewer carriers, shippers can develop stronger relationships, leading to better service levels, priority treatment and customized solutions. Carriers often have a greater commitment to service-level agreements for high-volume shippers. “If you prioritize service over price, you are probably going to focus on a smaller carrier base,” Lee stated.
When carriers have a better understanding of shippers’ needs, they are in a better position to make recommendations, such as route optimization or load consolidation, that can increase efficiency and cut costs. Lee said there may also be opportunities for shippers to transition from truckload service to dedicated service. "After we start with a truckload relationship, we can determine how we can optimize the network in a way that will provide cost savings and long-term reliability," he explained.
Back-Office Requirements: Managing multiple carriers requires significant time and resources. Consolidation reduces administrative complexity, minimizes contract negotiations and streamlines invoicing and performance tracking. “It is nice to have a sole contact, foster a relationship and create the reliability that can come with a personalized solutions provider,” Latimer said.
Enhanced Visibility: Fewer carriers can create a more streamlined approach to freight visibility, tracking and data analytics, giving shippers easier access to real-time information on loads and deeper insights into operations. Increased visibility can help improve forecasting and optimize operations.
Working With Us
Penske Logistics offers a full range of trucking solutions to support shippers' needs, including full-truckload shipments with Epes Transport System for short-haul, long-haul and dedicated freight transportation. Epes offers vast coverage areas, flexibility, reliability and security, along with real-time tracking, speed and opportunities to cut costs.
Epes has full access to all of the resources of Penske Logistics and Penske Truck Leasing, which includes access to a team of more than 11,000 drivers, nationwide maintenance and fueling facilities, and 24/7 roadside service. “No other truckload carrier has that amount of backing in our space,” Latimer added.
Are you ready to optimize your truckload strategy? To learn more about partnering with the Epes and Penske teams, contact 800-869-3737.