The freight shipping process is like a complex piece of machinery: There are many moving parts, and...
Understanding Different Types of Freight Carriers
Shipping is the lifeblood of commerce. It helps merchants reach customers across the globe, and creates profit for businesses globally. Choosing a freight carrier naturally is a critical decision in the import and export process. For shippers, there are many factors to consider; getting the product out fast and in good shape, while avoiding high shipping fees. For carriers, finding a shipper or client to work with and getting fair rates is essential. In order to start the selection process and limit logistics costs, understanding the different types of freight carriers out there is essential.While there are many different methods for shipping freight; including rail, ocean and air based carriers; a lot of freight shipping is completed through the use of OTR (Over-The-Road) carriers. OTR carriers use ground transport to deliver freight, usually across long distances. Often in shipping, a combination of different types of carriers can occur, but at some point freight is usually delivered to its final destination via truck. Freight shipping using OTR carriers is usually divided into LTL (Less-Than-Truckload), FTL (Full-Truckload) and consolidated shipments (multiple LTL shipments) at once.
However, what all types of carriers have in common is that they all have their own abilities and potential limitations. There are a few different types of carriers to choose from in the shipping process, and they function differently based on their capacity and capabilities. Of the carriers most commonly used within Canada, the United States and Mexico, we see a few specific types:
Asset-based are the carriers or trucking companies who own their own trucks and equipment, thus they work directly with shippers to provide services. These can be smaller companies, but often it is large asset carriers such as Fedex or UPS, providing the services.
Pros of Asset-Based Carriers:
- Consistent pricing as a result of their capabilities and direct link to shippers.
- Reliability, as they can hire drivers or staff to obtain a level of service they want.
- Can be intermodal or offer multiple services, thus more options.
Cons of Asset-Based Carriers:
- Capacity limitations. As they own their own trucks, when there is a surge in demand, they can only fit so many clients and tend to favor higher paying loads usually.
- They may also operate only within specific regions due to their asset capabilities.
- Challenges with stability. They are more prone to upsets in the market, due to owning the entire fleet and having to pay for operation costs and maintenance. This can result in scaling down or loss of business.
Consolidated carriers are a non-asset based carrier, because they do not own all the necessary means to transport freight from one location to the next in the shipping process, rather they rely on shipping partners to get freight to its destination, an example of this type of carrier would be Pitney Bowes.
Pros of Consolidated Carriers:
- Wide network of partners to choose from, ensuring that peak times or demand does not affect their ability to complete the shipping process efficiently.
- Cost saving, because you can use LTL shipments to pay for only the space used by the shipper and since they s also work with more partners, it allows for more options in terms of pricing.
Cons of Consolidated Carriers:
- More risk to the freight, as more hands are on the shipment at a time. Packages can potentially get lost, delayed or even damaged in the process.
- Communication issues due to many parties involved, which can affect delivery time. Consolidated shipments also require more time to prepare thus a little further planning is needed for the shipment.
Some companies own the means of sale and delivery for themselves, and you will see this in carriers like Amazon, who are responsible for every aspect from purchase to shipping. Shippers can also sell on Amazon or marketplace environments and then have Amazon deliver the packages. Other companies, like Uber, hire independent drivers to complete their delivery services, and are now partnering up with major retail companies like Sephora and Walmart to provide same day doorstep delivery. The post-pandemic boom has created a large space in the market for these independent carriers.
Pros of Independent Carriers:
- Good for new businesses who do not have an established client base, as packages will have the branding or packaging of the carrier. Major shippers like Amazon can take care of customers directly usually as well, since they are completing the delivery process.
- More flexibility in schedule and the type of work is providing more autonomy to drivers, while giving shippers more delivery options and windows.
Cons of Independent Carriers:
- It can be more costly to use these types of carriers and their services
- Somebody else is hiring the drivers who deliver the packages, thus there is less control for the shipper.
It it not just the equipment and business practices one can consider when it comes to freight carriers, but also where they provide service. Often, you will also see carriers grouped by the areas they may service geographically. We have the main three groups: Regional, National and Local.
Local carriers are smaller companies with fewer truckers and operating in a small geographic area, up to 100 miles or so. These are ideal for last mile deliveries or shorter distance shipping.
Pros of Local Carriers:
- Familiarity with the delivery area since their route is smaller geographically.
- Can offer customized services to their clients.
Cons of Local Carriers:
- Equipment issues can arise and they may not have the resources to ensure efficient delivery at all times.
- Prices are not as competitive because they service a smaller area and are smaller companies.
Regional carriers provide service within a specified area in the country, usually within a 500 mile radius. Though they are bigger than local carriers, they still work within a concentrated area. Many of them also provide next day deliveries as a result. You may also sometimes see Multi-Regional (2+ regions within the country) and Sub-Regional (part of a specific region) LTL carriers being used in specific circumstances.
Pros of Regional Carriers:
- Because they work in a specific area only, weather and other external challenges are dealt with more efficiently. They are more reliable or predictable in terms of delivery.
- Cheaper pricing and wider delivery and pickup time windows (Less Accessorial Costs = Cheaper).
Cons of Regional Carriers:
- Limited product to a specific area, so you cannot ship from or to certain locations.
- They are usually smaller companies with less financial stability as it relates to the market or hiring
National carriers are the largest freight carriers in the country, as they work within the country and at times internationally. They service larger companies and at times are found partnering up with smaller regional or local carriers. These carriers move border to border, or from coast to coast.
Pros of National Carriers:
- They have larger capacity and cover more ground across the country and internationally.
- Better technology ensures for smoother delivery and more flexible delivery times.
Cons of National Carriers:
- Can be more expensive given the higher level of service.
- Customer service may be lacking due to large coverage.
So how do shippers choose which carrier to work with?
Shippers often consider their shipping needs before deciding on a carrier. It is important to look at the following factors when choosing from a variety of different carriers:
- The area you are shipping to
- The needs of your package (is it fragile, does it require special handling)
- Delivery times that you need (are they specific or flexible)
- Communication practices of the carrier, and any tracking services that may be provided
- Any surcharges or other fees you may need to pay compared to your shipping budget
Shipping is almost as important as the product itself, and there are so many factors to consider. Price and time are the two critical factors. In order to know which carrier is right for a business, or which shipper is the right client, it is important to note business needs and capacity. The trick to choosing a freight carrier or shipper is to weigh the pros and cons, and compare your needs to their capabilities. In order to maximize time and reduce costs, ensure that you are considering all the factors involved.