Posts Tagged ‘Business Expectations Survey’

TCP Business Expectations Survey: As Carriers Continue to Shy Away From 3PL Providers, Higher Spot Quotes Draw Brokerage Usage Up

Wednesday, April 11th, 2012

According to Transport Capital Partners (TCP)’s First Quarter 2012 Business Expectations Survey, the majority of carriers reported utilizing broker services as a means of obtaining freight lanes less within the last 90 days compared to previous months.

survey

The survey shows that 67% of carriers have drifted away from brokers in the last three months, slightly lower than last year in which 86% acknowledged drawing away from 3rd party logistic services in February 2011 and 82% in August 2011, yet accounting for over twice the number of carriers pulling away in May 2009 (which was around 31%). 1

On top of that, TCP’s Richard Mikes explains that in a time where capacity is tight, more and more carriers are turning towards forming their own brokerage arms. 2

And with concerns over vicarious liability, chameleon carriers, double brokerage, and false 3pls, among other issues, shippers are becoming more careful on who they trust to transport their freight, vetting out carriers based on safety scores.

Let’s look at a recent ruling involving a double brokerage scheme.  Between 2004 and 2005, Kulwant Singh Gill operated as a California broker under several false names in order to obtain loads posted on brokerage loads.  Presenting false social security and driver’s license numbers, Gill presented himself as transporting the loads himself, and once given the load, would then repost the lane as a broker, handing off the load to another carrier.  Once the shipment was transported, Gill was paid by the original broker and never compensated the actual carrier, scheming over 100 trucking companies. 3

Gill was indicted in 2006 and again in 2008 for continuing his scheme, being found guilty in 2009.  After continuing to double broker loads, the court sentenced Gill to 10 years, 10 months in jail and ordered to pay $443,388 in restitution on March 28, 2012. 3

But despite the majority of carriers shying away from brokers, better rates have led to an increase in the number of carriers using 3rd parties.

Looking at TCP’s survey, 33% of carriers stated that they have increased their broker utilization in the last three months.  This number increased from 15% in August 2011 and 12% in February 2011 but is still less than May 2009 which reported 65%. 1

TCP gives the reasoning of higher spot quotes compared to contract rates (along with the need to fill lanes) to account for this brokerage increase.  As TCP’s Lana Batts explains, trucking companies, especially larger carriers, “are going back to brokerages because there is a shortage of equipment and they are getting better spot market rates than they are getting out of their contract rates.” 4

Although only 45% of carriers recently increased their rates, 77% believe that freight volumes will increase within the next year, which Batts believes will lead to an upward rate trend, spiking in early summer, and leading more carriers to utilize brokers since “carriers can get more money for non-contractual freight,” she states. 5

Need help deciding on whether to choose an asset-based carrier or a broker?  We’ve constructed a list of what an asset-based carrier, such as Road Scholar Transport, can provide versus a typical 3PL broker below.

broker vs. rst

click to enlarge

From your experience, what do you consider to be the benefits of utilizing an asset-based carrier over a broker?

1http://www.truckinginfo.com/news/news-detail.asp?news_id=76593

2http://www.truckinginfo.com/trucks-trailers/news-detail.asp?news_id=74969&news_category_id=29

3http://www.overdriveonline.com/broker-sentenced-11-years-for-defrauding-carriers/?pg=1

4http://www.logisticsmgmt.com/article/tcp_survey_shows_that_carriers_continue_to_be_active_in_the_spot_market/

5http://www.ontruck.org/imispublic/Home/AM/ContentManagerNet/ContentDisplay.aspx?Section=Home&ContentID=10822

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Survey Finds 73% of Carriers Holding Off on Growing Fleet Capacity Due to Low ROIs

Wednesday, January 11th, 2012

The recent recession took out 15-20% of capacity in the trucking industry and despite 61% of carriers expecting volumes to grow this year, trucking companies are not planning on adding capacity to accommodate these changes.

Transport Capital Partners (TCP)’s 4th Quarter 2011 Business Expectations Survey, published each quarter, lists three factors that are causing carriers to resist growing their fleets, among these operating ratios, low return on investment, and shortage of drivers.

According to the survey, over half of carriers participating in the survey (73%), acknowledged that they would not expand their fleets until their return on investment (ROI) improves, which they believe would be accomplished through better rates.

Low ROIs are a problem many carriers are facing due to the increasing cost of equipment, healthcare, and diesel fuel, as well as the difficulty qualifying for a loan, and despite rate increases, many companies are barely breaking even.

As a result, many companies have set an operation ratio they must obtain in order to succeed in gaining a ROI sufficient enough to invest in new trucks, with 25% setting a range of 87-90 and 50% acknowledging a range of 91-94 (http://www.truckinginfo.com/news/news-detail.asp?news_id=75729).

The majority of trucking companies who did claim to be making a plausible ROI consisted of larger carriers making ≥$25 million in revenue.

But these are not the only factors preventing carriers from growing their fleets. According to the TCP survey, 70% of carriers admitted that they do not have enough drivers to fill the trucks they currently do have, let alone invest in purchasing more. And with stricter rules and regulations, including CSA 2010, carriers who are investing on new equipment are doing so to replace old ones.

Road Scholar Transport operates newer equipment and safer trucks on the road. In fact, we have never been cited for a piece of faulty equipment involved in an accident due to routine pre-trip and post-trip maintenance checks and an experienced staff. Learn more about Road Scholar’s ability to safely transport your freight by visiting www.roadscholar.com.

Have you noticed fewer carriers purchasing trucks due to low ROIs and driver shortages? List your comments below.

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Survey Shows Nearly 40% of Small Carriers Seriously Considering Closure

Wednesday, October 26th, 2011

Transport Capital PartnersAccording to Transport Capital Partners’ Third Quarter Business Expectations Survey, the number of carriers who are seriously considering shutting down their businesses due to tonnage problems as well as economic uncertainty has increased in August.

As truckinginfo.com states, carriers are showing concern towards an uncertain economy, rising rates, shortage of drivers, and stricter regulations.  In particular, small carriers (those with revenue of $25 million or less) are considering no other choice but to shut down.

The survey indicates that 20% of small fleets predict closing their doors if “tonnage does not increase within the next six months” and 11.8% of larger fleets stated likewise, increasing statics by “32% from 11.3% to 15%” (http://www.truckinginfo.com/news/news-detail.asp?news_id=75107).

Although this number is lower than February 2009’s of 22.3%, statistics from the survey show February’s number to be well surpassed by the number of small carriers who are tempted to close within the next 18 months, ranking in at 40%.

Transport Capital Partners’ Business Expectations Survey also reported a drastic decrease in the number of carriers who expected volumes to improve within the next year, dropping from 92.4%, recorded last February, to 44.9% in August, with 7.5% actually predicting a decrease in volume, truckinginfo.com notes.

While carriers are judging their future based on whether or not tonnage improves, the American Trucking Associations’ For-Hire Truck Tonnage Index has already reported a 1.6% tonnage increase in September when compared to the previous month, 5.9% increase from the same time last year, and a 0.4% rise compared to last quarter, an article in thetrucker.com states.

These statistics show that “we are in a weak growth period for the economy, but not in a recession,” the ATA’s Bob Costello declared (http://www.thetrucker.com/News/Stories/2011/10/25/ATAtrucktonnageindexincreased16inSeptember.aspx).

Road Scholar Transport

As more and more trucking companies exit the competition, it will, in return, put a greater strain on capacity, leading shippers to pay more to have their freight moved.  Road Scholar Transport offers competitive LTL and Truckload rates with expedited shipping to get your freight where it needs to be fast, while maintaining an impressive safety record (we had a 0.0003% damage claim record in 2010).

Visit www.roadscholar.com and let Road Scholar Transport demonstrate our capabilities and expertise to you.

List your comments regarding Transport Capital Partners’ Third Quarter Business Expectations Survey below!

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Trucking Companies Drift from Third-Party Reliance as Capacity Issues Continue

Wednesday, April 20th, 2011

Transport Capital Partners LLCTransport Capital Partners LLC conducted their Business Expectations Survey for the first quarter and the results are not looking up for brokers.

According to the survey, carriers are gradually drifting away from brokers, whom they relied on to fill their empty lanes/trucks, with 87% of those questioned stating a decrease in their broker usage within the previous months, an article in The Trucker notes.

When compared to past surveys, the number of third-party shipments has decreased drastically, with two-thirds of carriers relying on brokers back in May 2009, the site explains.

As the survey demonstrates, “40 percent of the carriers report that broker freight services account for less than 5 percent of their revenues…35 percent report 6-15 percent” and “only a quarter of carriers rely on brokers for more than 16 percent of their revenues” (http://www.thetrucker.com/News/Stories/2011/4/20/TCPsurveyCarriersshiftfrombrokersascapacitytightens.aspx).

These decreases include smaller trucking companies as well, who previously relied on brokers moreso than large carriers due to their smaller service areas.  They too, according to the site, decreased their usage of brokers at the same level as larger carriers did.

What is the reason for this change?

As you may have guessed it, tight capacity issues currently facing the trucking industry are playing a large role.

Carriers are facing shortages not only in trucks, but drivers as well, finding that they do not have the capacity to accompany all customers’ requests.  Therefore, carriers are going to choose to service their current customers before going through third-parties.

With rising diesel prices, carriers are looking to cut costs and will profit more by transporting the freight with their own customers, whereas a typical broker

“achieves gross margins of 15 to 20 percent,” cutting into the amount carriers can make off the shipment.

But, then again, can it be that shippers are realizing the benefits of choosing an asset-based carrier over a third-party?

Both carriers and brokers operate within a framework that is based on distance, time, and rate.  But here is the difference.  It is the carrier, not the broker, who is constantly managing inventory and making sure freight gets transported to where it needs to be, on time, taking on a responsibility that far surpasses the framework of brokers.Road Scholar Transport

Ask yourself this, do you know who is hauling your freight?  Better yet, do you know when their equipment was last inspected?  Neither does the broker.  Luckily, you don’t have to worry about equipment failing with Road Scholar.  We never had an equipment failure due to newer models and daily inspections.

And for when something goes wrong, are you covered?  Did you know that the typical broker has no cargo or liability insurance?  Compare that to a company like Road Scholar who provides the proper insurance, which you can view at http://www.roadscholar.com/certifications.php.

Not to mention Road Scholar’s high security shipping and premium services.  Check it out for yourself at www.roadscholar.com.

Do you think shippers are gradually choosing to transport their freight via a trusted carrier instead of a broker due to security and safety issues?

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