TMS Systems Improve Small Motor Carrier Relationships

July 12, 2022

Small motor carriers are very important for shippers who are using TMS systems to control freight spend

Of the 900,000 motor carriers for hire operating in the United States, 97% operate fewer than twenty trucks. 91% operate six trucks or fewer according to the American Trucking Association. Many small motor carriers operate in just a few lanes, and often specialize in transporting specific types of goods that may require special care and handling. Small trucking companies carry a lot of freight, in fact, ATA data shows that the top 10 carriers in the U.S. have less than 10% of the market.

In mid-2020 and through late 2021, due to strong spot market prices for transportation and economic stimulation, the number of small for hire carriers rose by 39%, about 78,000 new companies. Because of attrition in the ranks of large carriers and private fleets, and an overall decline in the same period for total number of drivers, the total capacity did not increase substantially.

When demand for freight transportation by truck spikes, spot rates climb. If the overall number of trucks available for hire stays flat or declines, shippers who rely on for hire trucking to ship products must compete for adequate freight transport space.

 

Shippers who use TMS Systems benefit from using a small motor carrier

Using a small carrier os very important for shippers who are using TMS systems to control freight spend. Without a TMS System, the shipper’s dispatchers built loads by hand, made telephone calls and sent emails to trucking companies they knew, working with the few familiar motor carriers with whom they had a contract relationship, sometimes relying heavily on the spot market when they could not get a load accepted. With a modern, cloud-based TMS System in place, shippers can do much more: 

  • Build an extensive database of contract carriers
  • Focus on adding motor carriers to lanes where more coverage is needed
  • Evaluate motor carrier performance based on metrics
  • Focus on goals such as full first day acceptance and 100% on-time delivery
  • Spend more time working with customers to increase their satisfaction

The work balance for dispatchers and other transportation management professionals shifts with the implementation of a TMS System from an often high-pressure daily scramble to find enough motor carriers into a methodical data analysis-based quest to fill each important lane with enough carriers to guarantee 100% first day acceptance. While large carriers bring many more resources, due to the attrition just noted and the typically decentralized base of rolling stock, they may not be able to give smaller shippers priority treatment. This coupled with the large numbers of available small carriers means that shippers have to seek out small carriers to fill out their lanes.

A small carrier offers a broader range of support

Having a TMS System in place does not preclude using the spot market. Contract carriers for a less used lane might be in short supply during periods of high demand. Sometimes a shippers might not use a lane enough to seek out, establish and maintain contract relationships. Shippers also use the spot market to identify carriers that have accepted multiple spot-market contracts from them and performed consistently. These carriers can be approached for contract arrangements.

Small carriers as a group can offer shippers a broader range of support. They often focus on one or two lanes; they sometimes specialize in freight that needs special handling. Small carriers might feature Class 6 fleets for smaller loads. Even when spot rates are very high, some small carriers will agree to a regular weekly pickup, which helps to build a base of regular business they can count on. In short, small carriers can fill in the gaps and make full first day acceptance a reality.

Driver shortage is a reality

That said, shippers need to be aware that the overall number of drivers is declining. Even if market demand fluctuates, that demand no longer solely determines prices, the shortage of carriers will have an impact. According to ATA, the 3.6million drivers employed in 2020 represented a 6.8% decrease from 2019. Even though 2021 brought a large increase in the number of registered trucking firms in the US, overall capacity did not change. The belief is that many drivers quit larger companies to go out on their own in favorable market conditions. These entrepreneurs make their own decisions about which loads they will accept, and whether or not they will accept contracts and loads from any particular shipper.

Using your TMS System to become a preferred shipper

How can shippers use their TMS to attract and retain quality small carriers? One answer can be found in a fundamental rule for all small businesses; there is never enough time. If a shipper can focus on helping a small carrier save time at every step of their engagement, then the carrier has a better chance of making a profit from the relationship. Here are some ways TMS can help the carrier save time (and money):

Tender the carrier wantsUsing tendering rules configured for each lane and detailed carrier profiles, freight management professionals can tailor their tender offerings to those carriers with compatible rates and sufficient capability to accept the load. The carrier knows when the tender comes in that it is something they will be interested in bidding if they have the capacity available. Carriers don’t waste time reading tender that they cannot comply with, or bid work that they will not get.

Online BiddingCarriers can submit a bid to a tender with an easy-to-use online portal. No separate email or EDI exchange.

Prompt review and awardshippers can use bid review tools to quickly place an award. Where the carrier has signed up for a regular pickup, the award can be automatic.

Dock Schedulingwhen a carrier receives an award the carrier can use the system to schedule a convenient pickup time and be guaranteed quick service, reducing or in some cases even eliminating detention (wait time).

Consistent load guaranteeswhere a shipper has an agreement with a carrier to provide a certain minimum of business within a lane, tendering tools enable the shipper to easily takes those rules in to account for a tender. The carrier doesn’t waste time ensuring that the shipper is performing to the terms of the contract.

Accessorial chargesthrough the online carrier portal a carrier can register accessorial charges accumulated during the goods transport as they occur.

Autopay settlementwith autopay carriers and shippers avoid the tedious and time-consuming process of comparing invoices with matchpay. Both parties save time and money.

The future of freight management within the supply chain may have to deal with fewer drivers available, and many of those will be independent. As a result, freight rates will no longer depend solely on the market demand, they will also be affected by limited capacity resources. Shippers will need to build into budgets to consistently pay motor carriers fairly for the value of their service. While a shipper can ensure that an individual carrier is never offered tender below the carrier’s minimum rate, if a shipper truly wishes to strive for 100% daily load acceptance and on-time delivery, then that shipper will have to make a good faith effort to offer every tender at a fair market freight rate.

Ask about how Princeton TMX carrier scorecards can deliver insights that can help improve relationships with small carriers.