Real Information on the 4PL Market

What This Article Covers

• What is a private fleet freight brokering marketplace conceptually? 
• What are they necessary? 
• Why would a freight brokering service / marketplace that focused on private fleet backhauls (and in some cases whenever the private fleet has excess capacity be a good idea? 

Background

This article originated from an analysis of how outsourced transportation had been oversold for quite some time. One of the major benefits of outsourced transportation is that the transportation company can use the fact that it moves much more freight that most private fleets to move freight both directions and reduce the amount of deadhead miles. This is in fact, probably the most compelling benefit of outsourced transportation. However, the assumption has always been that the freight must be within the carrier’s network in order for this efficient allocation of transportation resources to take place. However, is this the case?

What Is Required?

First a private carrier must apply to operate as a for hire carrier, which is a requires filing legal documentation and keeping rates on file with the state. They can use a standard freight carriage contract, or they use a service certain brokers, they may have to use the freight contract employed by the broker. In fact according to Trucking Partners, around 53% of private fleets are registered as for hire carriers, and some percentage of the other 47% also carry solicited freight through what is essentially a loophole called trip-leasing, where a private fleet truck can run under the authority of a common carrier for a “trip.” It is also recognized that many private fleets are very active in soliciting freight for their backhauls. If fact, roughly 70% of private fleets sell enough of their capacity to other customers that they are able to run their private fleet as a revenue center. However, on the other hand, some private fleets can become obsessed with getting profits from the private fleet as is noted in this quote.

Many private fleets spread themselves too thin in the quest for the attraction of revenue-producing freight.  They send their equipment all over the place and forget to provide the quality of service expected by their parent company.  The successful private fleets that exercise for-hire options solicit business within existing traffic lanes.  In other words, the for-hire option is simply supplemental to private operators.

Trucking Partners brings up the following good points that a private fleet needs to ask itself:

1. Can drivers and equipment be delayed long enough to accommodate the pickup and delivery of backhaul loads? 
2. Is the equipment suitable for implementation of a backhaul program? 
3. Do you have a good handle on your costs?  - You need to understand the impact of providing “for-hire” activity on your operation in terms of equipment delays, out-of-route miles, drivers’ hours of service, etc.
4. Do you have the ability to solicit freight? - It’s a competitive market out there and freight won’t just appear because you want to fill an empty lane. Your services must be sold and coordinated . . . that’s our job!

Therefore it’s clearly a trade-off going for common carriage freight. However, when it comes to the effort of managing for hire freight, there are companies like Simon Transport that can manage the process of getting freight for backhauls. Therefore, this does not have to necessarily be performed by the in-house transportation department. Interestingly as recently as the 1980′s it was not legal for private fleets to haul freight for companies other than their parent company (most likely due to legislation introduced by the lobbyists for common carriers). Furthermore, those that do contract out their private fleet or solicit freight for backhauls only report a cost reduction of 10% per mile.

Freight brokerage web-based boards are common at this point. One which I discussed in the previous article was The SuperBoard, which is one of the biggest. However, most of them come across as amateurish. Also, it’s probably not a good thing to have many web boards as this means the companies looking for trucks or private fleets looking for loads have to search multiple sites, which is inefficient. In fact, the internet based freight information sites seem underdeveloped, and I would not at all be surprised if freight brokering still very much relied upon personal relationships, phone calls and emails. However this true of freight boards generally, and does not say anything in particular about the options available to private fleets versus common carriers.

Focused on Private Fleets?

Interestingly I was not able to find many freight boards online that focused on private fleets. I did find a freight broker that focused on private fleets called Private Fleet Backhaul (PFBH). According to their website “PFBH will move 23,000+ loads in 2011 via private/dedicated fleets, with revenue that will place us in the top 5% of freight brokerages nationwide.” Another site called Backhaul Direct has a very slick site, and is clearly focused on filling backhauls, although it is not directed towards private fleets. However, this is little reason a private fleet could not sign up for this service.

Conclusion

There does seem to be a missed opportunity in the area of a private fleet freight brokering marketplace. Private fleets that require backhaul loads is a huge market, and have slightly different needs than common carriers. A freight brokering marketplace that only focused on these companies would make good sense. This should go beyond simply being a marketplace, and as with Backhaul Direct, stipulate a common freight contract that all private fleets must adhere to. Likely customers for such a marketplace would be shippers with less sensitive time delivery windows who are looking for a good price on freight movement.

References

http://www.freightbrokerbootcamp.com/blog/what-is-a-backhaul/

http://www.truckingpartners.com/private_fleet_solutions/

http://www.worldtradewt100.com/articles/shippers-are-adding-private-fleets-to-their-transportation-mix

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