Supply Chain Optimization

Carrier contracts are dead - long live brokers - Transportation | Warehouse Optimization

Written by Tom Moore | Sep 11, 2018 12:00:00 AM
 

 

Many big shippers have so-called contracts with “core carriers”.  Many of these are loosely structured, promising a limited volume of loads in exchange for a rate structure. Even carrier contracts that are more stringent may be on the endangered list.  Here is why:
  • The vast majority of trucks on the road belong to small fleets with less than 10 power units
  • Freight brokers, brokerage arms of carriers, and technology plays (e.g., Uber for trucks) are able to connect transportation buyers with these small fleets
I see a real downside:  big brokers should be able to game the system because they have a lot of data.  They can see what is coming and going from each market. With this data, a big broker, for example, should be able to relatively accurately predict short-term shortages and gluts.  By pre-buying or proactively selling, these brokers can generate bigger profits.  What is a shipper to do? Firstly this is speculation on my part – but working with some AI experts in the hedge fund business makes me feel confident…if I can work out how to do it, I can bet sophisticated brokers have too.  Since knowledge is power, I’d suggest large shippers band together to share data in real-time and similarly predict the market, or you can simply pay more.