Shippers Compete for Carriers Amid Capacity Crunch
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Trucking companies that are growing more selective with loads are spurring heightened competition among shippers, experts said.
“In this capacity-constrained freight environment, regardless of mode or region, we are seeing shippers competing to secure carriers,” Chris Kina, director analyst at Gartner Supply Chain Practice, told Transport Topics. “Paying higher rates will no longer guarantee you will win — everyone is paying higher rates.”
Kina said factors such as speed of pickup at facilities, consistency in demand, accurate capacity forecasts, payment terms and digitized document processes are factors that determine carrier choice.
Paying higher rates will no longer guarantee you will win — everyone is paying higher rates.
Chris Kina, director analyst at Gartner Supply Chain Practice
“The global driver shortage plaguing the industry is worsening, and carriers must optimize the use of their assets and labor by matching the most favorable shipment profiles with available resources,” Kina said. “With no significant decrease in demand or increase in driver capacity projected anytime soon, it remains a carriers market.”
Kina said the average carrier tender reject rate for truckloads has been hovering between 25% and 30% for much of 2021. That means, he noted, carriers have their choice of high-margin freight.
“We’ve seen it get progressively more complicated this year,” Blume Global CEO Pervinder Johar told TT. “The market has shifted to really a sellers market, not a buyers market, when it comes to transportation. That comes from, ‘Whose load do I accept and whose load do I reject?’ The choice is now more with the motor carriers.”
Armstrong & Associates, a third-party logistics market research and consulting firm, sees noticeable movement in the 3PL market because of these trends. It projects the freight brokerage side of the segment is going to grow about 39.5% compared with last year to $127.2 billion.
“We’re seeing that in the growth of the domestic transportation management 3PLs,” company President Evan Armstrong told TT. “Whenever it’s harder for shippers to find their own carriers, they turn to 3PLs. So that number says a lot — almost 40% year-over-year growth. It started growing really fast, essentially in May or June of last year. It’s been a lot of growth; carrier capacity tightened and 3PLs were the beneficiaries in a lot of cases.”
Armstrong believes much of that growth was passed on to carriers in the form of new rates, and said the trends have put more focus on how 3PLs manage carriers and the importance of properly managing margins.
“On the carrier side, a lot of them have been playing the spot market instead of giving contracted rates, and they’re going to demand a certain level of pricing. They have a lot more pricing clout than they really ever had,” Armstrong said. “So carriers have gotten a lot better about negotiating given the position that they’re in.”
PowerFleet CEO Chris Wolfe noted that, in choosing which shippers to do business with, carriers are scrutinizing who is delaying their drivers and not getting equipment turned around fast enough.
Plus, he noted, wait times at ports and facilities have gotten exponentially long.
“You are seeing carriers being a lot more selective on the shippers they decide to haul for,” Wolfe told TT.
He noted, though, that shippers also want to ensure they are working with good partners.
“The shippers are the same way in saying, ‘I need carriers that have enough drivers to haul my freight.’ So definitely a joint responsibility,” Wolfe said.
John Luciani, chief operating officer at transportation and logistics provider A. Duie Pyle Inc., has watched for about two years as shippers work to secure good relationships with reliable carriers to minimize the impact on their supply chains. He said having respect for each others’ challenges goes a long way.
“First of all, have reasonable service expectations,” Luciani told TT. “Partner with the carrier to allow the carrier to earn a profit, so that the carrier can reinvest in infrastructure and people and technology, [and] support technology initiatives to help build efficiencies.”
A. Duie Pyle ranks No. 69 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
Darren Chan, co-founder of logistics software company Vector, told TT that the driver shortage has applied enough pressure on the overall market to affect rates, capacity and negotiations.
“We’ve always had a driver shortage — ever since we entered the industry,” said Chan, whose company develops technology to streamline communication and transparency for logistics providers and field service operations.
“Since the pandemic,” he said, “[the driver shortage] basically increased to the level where it did move over to the carriers in terms of control, and them being able to dictate a lot of terms."
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