Commoditization of transportation and logistics puts shippers on shaky ground

Let’s face it—transportation and logistics services today have been heavily commoditized. Amid the pandemic recovery, when freight volumes plummeted in a sea of capacity, pricing took a nosedive. Those low rates remain—for now. And like those selling ground beef and gym socks, brokers and carriers with the cheapest rates often win.

But these bottom-of-the-barrel rates are introducing tremendous risk to businesses, like yours, and blunting their growth.

When shippers say yes to rock-bottom pricing, they’re also saying yes to unsustainable business partners—and no to strategic consulting and proactive service that ultimately spurs their next phase of growth.

That’s why forward-looking shippers are wise to think beyond the freight rate—to seek added value and long-term resilience over the lowest cost.

With this in mind, you might be asking yourself, “Where exactly is the market now—and why? How exactly do low freight rates threaten my business, and how can I source growth partners who will help me create more sustainable profits?”

Let’s dig in.

What’s driving these sustained low freight rates?

We all know the 2023-2024 holiday spike in rates didn’t materialize as strained brokers and shippers had hoped. In fact, the market has been positively abysmal for the last eight months.

A major factor is that large freight brokers have made cheap rates their singular focus—to their customers’ detriment.

Rather than building something new and bringing value to their clients, these big conglomerates are engaged in a constant cycle of acquisition and layoffs to capture new customer portfolios and maintain shareholder stock prices.

You’re seeing it happen over…and over…and over again. They acquire a smaller player. Cut 100 employees to shed expenses. Narrowly escape catastrophe in the next quarter. Rinse and repeat.

These cheap freight rates and massive staff cuts come at a cost to all of us.

The service they once delivered to shippers, like you, has deteriorated, and they push pricing down for small-to-mid-sized competitors in the process—creating a knock-on effect.

Pre-pandemic, relationship-centric brokers and carriers could offer low rates to get their feet in the door, and then deliver sustainable rates after demonstrating their value. And there is real value in having talented, fully-staffed operations, track and trace, and billing teams backing up your service.

But that doesn’t happen often today.

What shippers may not realize: They’re sacrificing tremendous value downstream for a perceived value in low rates today.

Because what happens when you sacrifice talent and culture by treating the business like a “hamburger” commodity? When you strip down staff and operate on a skeleton crew?

Logistical food poisoning.

What’s the true cost of that cheap freight rate?

Like any industry, when a growth partner sheds staff, efficiency on their end translates to a lack of resilience on yours—introducing risk that ultimately cuts into your profitability.

Without diligent, experienced teams training their eyes on your loads, you’ll see bottom-line impacts in time:

• Missed deliveries that damage key customer relationships
• Unaddressed safety issues that open you up to liability
• Weak security protocols and tech that make you vulnerable to data and product theft
• Service that goes quiet after the sale and throws the brakes on your claims recovery

Ultimately, this poor service threatens your customer retention and brand reputation.

Secure your future by sourcing partners that protect your brand and accelerate growth

Moving beyond the currently easy path of transactional relationships in favor of partners invested in your success may not be cheap—but it can ultimately deliver big rewards to your balance sheet. Assessing your options when brokers and carriers are hungry for work isn’t always easy, though.

How do you sift the wheat from the chaff?

Prioritize relationships and consulting

Test-run a few loads with prospective partners.

A team that takes a relationships-first approach will be proactive, they’ll embrace accountability and transparency as opportunities for you both to get better. If they encounter long dwell times, for instance, they’ll give you visibility into the issue and share their hard-won wisdom so you can address it—even if it means invoicing you less.

Partners like this want to build and grow together—and when capacity tightens, they’ll be there to take care of you.

Vet for financial stability

You can’t afford to book a carrier and have them leave you hanging or, worse, abandon your freight if they go belly up. So thoroughly vet your existing and prospective partners: Assess their debt-credit scores, payment histories, and credit utilization.

This goes for mom-and-pop operations and big national corporations. The notion of “too big to fail” no longer holds. Yellow certainly made that clear.

Closely examine security

Fraud is rampant in the industry today, and cargo theft is up 49% year-over-year in the first half of 2024. Partners that lack deep staff resources and robust tools will leave your loads vulnerable to crime syndicates.

So, assess your partners’ approach to securing your freight and data:

• Inquire about the platforms they use to validate partners; you should hear names, like Carrier Assure, Highway, Verified Carrier, and FreightValidate
• Ask about their internal protocols, which should indicate a zero-trust approach: verifying the identities of brokers, carriers, drivers, and warehouse managers tasked with moving your freight

Assess experience

Some in the industry employ junior teams to cut costs. (A short-sighted approach, if you ask me.) Steer clear of them.

Ask how long the leadership team and the people directly involved in moving your loads have been in the industry, and inquire about their real-world product knowledge, too. Only those with deep experience will spot the potholes ahead and help you navigate around them—moving your commodity safely, on time, and in perfect condition.

Optimize your route to success

Insight. Agility. It matters in the freight industry—and it matters to your business, too.

When you link up with value-added partners, you’ll be empowered to drive efficiencies that free up capital for business-boosting investments and be positioned to scale at the drop of a hat. That’s what that incremental increase in your freight rate buys you—consultants who understand the landscape and can help you intelligently navigate your success.

Have questions about the state of the market? Want to learn more about our approach to serving customers? Connect with us. We’d love to hear about the challenges you face and share our perspectives.