(Graphics created by Emily Ricks)
Understanding the nuances between freight carriers’ business models can be confusing at best. Brokerages, asset-based, non-asset-based and lite providers all exist. However, some combine and fall within one another’s categories. Others thrive in a space between all three. It’s a continuously evolving industry, and an asset-based lite solution is one merger or acquisition away from entering the realm of an asset-based brokerage. Of course, it’s important to recognize that these categories are not identical to the four trucking carrier types. After all, each of these models can be broken down into additional service tiers, solutions and more. To that end, let’s take a closer look at the three dominant models used by freight carriers and their similarities.
Part of the confusion between carrier model types comes from the terminology in the industry. Non-asset-based freight carriers do not own their equipment. In this way, the carrier possesses qualities more comparable to a 3PL or transportation broker. However, this model allows carriers to use network connections to find more capacity, work across more shippers and endure disruption. Furthermore, partners of a non-asset based freight carrier may also fulfill brokerage roles, helping shippers source all modes of freight, make decisions with consultancy services, track logistics metrics, perform auditing and accounting functions and more.
Consider this value proposition, noted by Redwood Logistics. “Equally as straight to the point, non-asset-based carriers do not own their own equipment. This type of carrier may partner with subcontractors, lease equipment and configure custom warehousing needs. Now, we know what you are thinking. What is the point of working with a carrier that simply acts as a 3PL? And we hear you, but non-asset-based carriers offer something that an asset-based carrier typically doesn’t. What is that one thing, you ask? Flexibility. By being able to tap into a network of various partners, this type of carrier can connect you with the right partners. Partners who may be more tailored to perform the job than the team over at the asset-based carrier company.”
In the end, non-asset-based carriers serve as the true third-parties of the supply chain, building flexibility and expertise over simply moving owned assets and accepting loads. And by extension, any non-asset-based broker falls into this category too.
Unlike non-asset-based carriers, an asset-based company owns equipment, employs drivers and manages all the workflows common to non-asset-based carriers. However, the added pressure to manage drivers, collaborate within the network, handle dock schedules and define new opportunities to save money for clients is absolute.
Asset-based freight carriers include the biggest names in the industry, such as FedEx, UPS and DHL. Of course, it can also include any freight brokerage that operates a strong, large fleet. This is where some of the model language gets more confusing. These brokerages still retain their validity of service as a third-party consultant and brokering partner. However, they may possess individual assets that rival some of the most established local and regional carriers. Rather than getting bogged down in a debate over regional versus sub-regional carrier models and reach types, it’s important to stay objective.
Regardless, the defining characteristic of an asset-based freight carrier is ownership of assets. It’s that simple.
There’s yet another carrier model to consider. Asset-lite, or “asset-light” depending on word preference, describes a freight carrier model that falls somewhere between a non-asset-based and asset-based brokerage or carrier.
For instance, Coyote explains, “Asset-light carriers try to maximize their coverage area while minimizing the amount of trucks, drivers and terminals they own. They do this by relying on driver capacity of smaller providers. Asset-light carriers will also often share space at terminals with other, much larger carriers.
Asset-light carriers will usually complete long-haul hub transfers using intermodal or full truckload shipping, then outsource the final mile deliveries to regional carriers.”
Additionally, asset-lite providers can turn any asset into a viable service or offering. For instance, warehouse space could mark the distinction, allowing a shipper to work with the asset-lite carrier for the temporary staging of freight in urban fulfillment. Meanwhile, asset-lite brokerages may help shippers move freight within local regions but outsource the longest and most costly aspects of the shipping journey to more established carriers, including the big three. Regardless, the role of using the right brokerage software and casting a wider net to increase throughput is still a necessity for even lite solutions.
The ideal world would have a set series of tips and actionable steps to choose one carrier type over the other. Unfortunately, that’s not a reality for modern freight management. It’s too complex, and individual shipments require a full view across all lane metrics, accuracy of insights and informed decision-making. Thus, shippers should not limit their annual or short-term RFP processes to one carrier type.
After all, a more diverse network will always persevere over those with limited capacity and contacts. Start by recognizing that fact. And continue the path to success by gathering the data needed to know when to start expanding or looking for additional carrier capacity by putting the power of FreightWaves SONAR to work. Request your FreightWaves SONAR demo by clicking the button below today.