How Shippers Navigate Risk in a Fragmented Freight Market

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Small carriers make up a significant amount of available trucking capacity, but accessing that capacity presents unique challenges for shippers, especially when booking short-term or one-off loads in the spot market.

Shippers and logistics providers are stepping up efforts to vet and verify carriers to ensure safety and reliability amid increasing delivery expectations and ongoing concerns with freight fraud.

Lou Amo, president of truck brokerage for RXO, said the procurement process is filled with complexities in a truckload market that is massive and incredibly fragmented.

“Plus, a vast majority of carriers are small trucking companies, meaning there is a decent amount of churn in response to freight market conditions,” he explained.

Cody Griggs, vice president of digital brokerage for C.H. Robinson, said 90% of carriers have five trucks or less, and 60% are owner-operators. “Being on the shipper side and trying to manage all those relationships is difficult,” she said.

Major Issues

The top challenges within the spot market center around service degradation, capacity availability, and potentially higher theft and fraud risk.

“Carriers primarily prefer contract freight that has predictability and consistent volume, so that they can plan drivers, revenue and build out a much more stable business model,” said Kevin Clonch, group director, global transportation procurement for Ryder System.

Although there are differences between carriers, they aren’t always clear. Chris Burroughs, president and CEO of the Transportation Intermediaries Association, noted that carrier selection is a nuanced, often technical process.

“[It’s] always exceedingly complex subject due to the innumerable differences among motor carriers who may appear the same on the outside to the general public and yet, to professional users, offer far different services,” he said.

Shippers’ standards have always been high, said Tracy Urbanski, senior vice president of operations for Penske Logistics, but they are even higher today, and some industries have stricter requirements than others.

“You don’t shut down manufacturing, and perishable goods are perishable by nature. So, there are spaces where we see financial penalties more frequently,” she said. “You see it in the automotive space, and that’s bee…