Freight Management for SMBs:
Why Small Businesses are at Risk
For CEOs of small and mid-sized businesses (SMBs), freight management is typically not on the top of the priority list. At minimum, they might ask, “Can we get it cheaper?” Unfortunately, the freight question they should be asking these days is, simply, “Can we get it?”
Market forces and government regulations have reduced the number of trucks and drivers available to haul freight. When freight capacity tightens and competition for this capacity increases, SMBs may not be able to secure capacity at a reasonable price. That’s a risk that CEOs can no longer ignore. In a seller's market, SMBs lose.
When the demand and supply equation for freight favors carriers, they can be more selective about the freight they haul. SMBs lack several of the characteristics that are attractive to carriers, the primary one being a high volume of steady, predictable freight.
Freight Management and the Role of 3PL Companies
Strangely enough, some prime competitors to SMBs for freight capacity could be their greatest allies: third party logistics providers.
Typically, SMBs manage freight with a small internal staff. Their rationale: the limited freight activity doesn’t warrant bringing in a freight management company. Here’s why that thinking can backfire in a tight freight market.
SMBs don't have the freight volumes to gain leverage in carrier negotiations. 3PLs, on the other hand, aggregate their freight spend across many customers and can leverage that volume to secure lower rates, which are passed on to the SMB.
SMBs lack the advanced technology to make their freight attractive to carriers. Most freight management companies have made significant investments in systems to optimize freight moves. For instance, after moving a load from Albany to Detroit, the 3PL can then arrange for that same carrier’s truck to move a load to Chicago and, from there, get a backhaul run to Albany. A large customer base and smart transportation systems enable these continuous moves, which make carriers more profitable. Ultimately, carriers will favor shippers that contribute the most to their bottom lines.
Can Outsourcing Freight Management Benefit SMBs?
Fewer trucks and fewer drivers has turned freight hauling into a seller’s market, threatening the ability of SMBs to source the capacity they have, for years, taken for granted. C-level executives at these companies need to immediately explore strategies that ensure they can get the capacity they need, at a rate they can afford.
Third-party freight management companies are one answer worth considering, even for small shippers with a limited freight spend. We address this subject in detail in our recent paper: CEOs at SMBs Need to Focus on Freight – and Fast.