Asset-based trucking leads to several inevitable challenges. These challenges frequently leave shippers and logistic service providers (LSPs) scratching their heads. These challenges may appear overwhelming, but shippers and LSPs can combat them by knowing the driving forces behind them. Awareness of these challenges can ensure that shippers and LSPs remain prepared for market deviations and overall freight pricing changes. These asset-based trucking challenges appear in many various forms and can lead to major expenses, which may cripple and impair any business. Shippers and LSPs armed with the knowledge of these challenges can make plans to better handle them.
Pricing alignment makes for one of the more complicated challenges for asset-based trucking. The issue for shippers and LSPs comes from the typical balance, or lack thereof, between freight contract rates and spot rates. If these freight rates do not accurately reflect the market, they can cost shippers significant amounts of money. Contract rates account for a considerable percentage of trucking industry loads. These most commonly take the form of transactions between shippers and carriers with long-term contracts. Spot rates make up a minor part of the industry. However, the dynamic nature of spot freight rates makes them particularly challenging. These rates come from one-time, inconsistent loads and/or freight market volatility. The volatility makes it difficult to assess pricing. Asset-based carriers should ensure proper pricing alignment, which eliminates unnecessary expenditures and costs.
Another significant challenge for asset-based trucking comes from a lack of real-time freight visibility into asset location. Real-time visibility allows shippers and LSPs to better track their assets. Additionally, real-time visibility eliminates unnecessary costs. Think about it. LSPs that can better locate their assets, reduce expenses and lost time. But if they lack that ability, it will create issues for shippers. These issues are easily avoided by using trucking data and analytics that provide real-time visibility. In turn, shippers and LSPs can better track products, trucks, drivers and anything else within the supply chain. Real-time visibility for asset location also enables shippers to make more informed decisions. Tough decisions regarding asset location can fade away with increased visibility for asset-based trucking.
Another challenge comes from offering the proper trucking rates to drivers. Asset-based trucking carriers unable to provide accurate rates run the risk of ruining their driver retention rates. The costs associated with finding and hiring new drivers are detrimental and almost always a hassle. Better rates for drivers ensure that they continue to do business and operate at an optimal level. Additionally, better rates improve driver morale. And higher driver morale and retention ensure that a business has an excellent supply of drivers on hand to combat any truck driver shortage. That promotes overall company profitability and secures the network, so it continues moving freight.
Limited freight capacity also creates problems for asset-based trucking carriers. Limited capacity means that truckload and delivery times suffer. The astounding growth of e-commerce has created a significant strain on the industry, and even with ample drivers, capacity is a finite resource. This makes it all the more critical, especially during crises, for shippers to plan for limited capacity. According to Forbes, e-commerce “jumped by $52 billion” throughout 2020 because of the pandemic. And as a result, 2020 proved that every business should come prepared with a plan for combating challenges regarding supply and demand.
There is also the risk of empty backhauls to consider. Empty backhauls cost asset-based carriers an enormous amount of money. The resulting empty miles are yet another expensive and unnecessary expenditure. Asset-based trucking carriers that utilize data and freight analytics to track their assets can fight back against these issues by only choosing headhauls where a backhaul opportunity is likely.
The challenges associated with operating an asset-based trucking carrier seem increasingly difficult. However, these issues can be tackled through proper asset utilization and proactive management based on near-real-time freight data. Overcome the barriers to effective asset management with FreightWaves SONAR. Request a SONAR demo by clicking the button below to get started.