When selecting a logistics partner, there are numerous factors that need to be taken into account. One of the most important questions when deciding is “do I choose an asset or non-asset based carrier?”. What most logistics professionals don’t realize is that this is far too simple of a question. When it comes to choosing a partner, the last thing you want to do is eliminate options based solely on whether or not they are asset or non-asset based. Throughout this blog, we’re going to touch on the factors you should be considering when selecting a carrier.
A study conducted at MIT took an in-depth look at the main factors that should be evaluated when choosing a carrier. This includes the building blocks of the Perfect Shipment metric, a comprehensive breakdown of how to find the right carrier fit-rather than just a “brand name” carrier.
Perfect Shipment Metric
When selecting a carrier, you first need to understand what perfect shipments and perfect shipping scores are. This is a metric that digs deeper than the typical KPI’s like On-Time Performance (OTP), tendering, lead times, and more. The Perfect Shipment Metric takes these factors into account as well as other overlooked metrics like load consistency, lane density, and the portfolios of clustered carriers.
With that being said, what are some other factors you should be looking at when it comes to selecting a carrier?
The logistics industry is no stranger to specialization, and that’s why you need to be aware of the existing customers and industries the prospective carrier specializes in. In the study, a carrier’s industry focus was in fact one of the stronger indications of higher performance and a better likelihood of more perfect shipments.
Familiarity also plays a large part in an increased perfect shipment score. When you have a carrier that has experience within your specific industry, they are able to foresee the potential pain points and problem areas within your lanes. Having that established relationship and continuity with carriers play a significant role in ensuring increased service levels.
The study takes a look at the claim that load density and carrier performance have a strong correlation. On paper, it can be inferred that when given a high volume of lanes, a carrier will operate to the highest performance, while carriers with the lower volume of load density, will operate at the lowest performance.
According to Figure 1 above, while carriers with higher load density do operate at the highest performance level, low-density shipper lanes have more variance in performance. This shows that while you can rely on a primary carrier to handle a bulk of the loads in a lane to a high-performance standard, having supplemental carriers to handle the rest of the loads doesn’t necessarily mean carrier performance on those loads will decline.
Everyone wants a partner with experience. At the same time, you don’t want a logistics partner that has too much on their plate and can’t service your account the way it deserves to be serviced. Asset based carriers tend to have a higher customer count, showing their experience and capacity to service a wide range of customers. On the other hand, non-asset based carriers tend to have a smaller client-base, a byproduct of brokers having their own network of industries that they specialize in.
While non-asset based carriers tend to have fewer customers, that doesn’t necessarily mean they own a significantly smaller portion of available lanes. When it comes to load distribution, the highest performing carrier group is close to evenly split between asset based carriers and brokers, and the second-highest performing group is actually skewed heavily toward the usage of non-asset based carriers, seen below in Figure 2.
Fleet & Broker Size
In the study, the researchers broke down asset based and non-asset based carriers by fleet size and brokerage load volume and how that plays into choosing the right logistics partner.
Asset Based Carriers
Based on the findings, it was shown that in general, medium-sized asset based carriers that focus on a certain industry and regional area have the highest probability of reaching a perfect shipment score.
In Figure 3 above, the primary carrier breakdown is as follows:
Leaders: Medium-sized carriers, serving a specific geographical area with a focus on a few industries.
Major Players: Large Carriers with a fleet of over 1000 trucks, serving a much wider geographical area, serving multiple industries.
Laggards: Medium-sized carriers serving a wide geographical area and the widest array of industries. This group suffers from the byproduct of spreading their resources too thin.
Non-Asset Based Carriers
When it comes to non-asset based carriers, broker size is determined by the number of loads handled, rather than fleet size since they do not own trucks. The findings of the study show that medium-sized brokers with an emphasis on shipper and lane service bode well in reaching a perfect shipment score.
In Figure 4 above, the primary carrier breakdown is as follows:
Leaders: Small to Medium-sized carriers, servicing a smaller number of lanes and customers, allowing a focus on lanes and shippers.
Major Players: Medium to Large brokerages handle the bulk of a shipper’s lanes and higher load acceptance rates. They tend to have more shippers and lanes to service.
Laggards: Small carriers that service many lanes. These carriers tend to take a quantity-based approach, leading to lower levels of service to shippers and lanes.
All in all, when selecting a carrier, it’s important to ask the right questions and garner accurate information ahead of time in order to make an informed decision.
When bringing on a new logistics partner, you need to ensure you’re looking for just that, a partner. It’s extremely important to pick a partner that understands your industry, lanes, and your overall company profile as this will ultimately lead to a more efficient supply chain operation.
Bleggi, Caroline & Zhou, Frederick (2017). A Study of Freight Performance and Carrier Strategy. Massachusetts Institute of Technology Library. https://ctl.mit.edu/pub/thesis/study-freight-performance-and-carrier-strategy