Why Direct-to-Carrier Freight Transport May Cost You MoreWritten by Neal Willis
Shippers are often unable to achieve pricing concessions such as higher claims liability limits and reduced and/or waived accessorial fees built in to their LTL freight carrier tariffs on their own accord. The volume just doesn’t warrant such aggressive pricing. Higher freight transport costs can be due to multiple factors, including the lack of volume and/or purchasing power, and your freight transportation may end up costing more if you’re working direct-to-carrier rather than through a 3PL or LTL freight management company.
Generally speaking, LTL freight carriers strive to achieve profitability by keeping aggregate freight transport costs across multiple shipping lanes lower than the aggregate freight transport revenue they receive for hauling the freight. LTL freight carriers analyze freight transport costs throughout each shipping lane and work towards profitability, which can mean they will sometimes accept a loss (lower rate) in certain lanes, if they’re able to make up for those losses in other areas.
LTL freight carriers normally view a 3PL as one customer who ships LTL freight throughout many different lanes (customers). Working with a 3PL or freight management company can allow shippers to take advantage of lanes where freight can be hauled at a loss because of the carrier’s profitability as a whole with the 3PL.
There’s also more to freight transport costs than meets the eye, like administrative costs that aren’t necessarily incurred during the line-haul. Since carriers work hard to keep their freight transport costs to a minimum, operational and administrative efficiencies are a primary means for the carrier to contain costs. Any cost efficiencies that a shipper can offer an LTL freight carrier will go a long way in securing aggressive pricing. Whether through automation or other means, shippers who work direct with their freight transport company may be unable to offer certain administration and/or operational efficiencies that could otherwise be obtained by partnering with a 3PL and utilizing their technology and resources.
A 3PL and/or LTL freight management company can offer LTL freight carriers certain operational and administrative efficiencies that a single shipper can’t provide, such as dedicated customer support staff for help with clerical and customer service issues, which ultimately reduces payroll expense for both the carrier and the shipper.
Another matter to consider is that shippers are generally apprised of more freight transport options when they work with a 3PL, which means they’re less likely to leave an alternative, lower cost option for freight transport unexplored. Working with a 3PL can also help to ensure you receive attention from the LTL freight carriers at both the local and national levels, which means more eyes and ears focused on your business.