Carriers may abandon ownership principles
Third party logistics providers (3PLs) have been operating as non-asset based brokers of commercial transportation for years. At times, they pretend to have assets – superimposing their logos on to independent owner-operator equipment for social media posts and other marketing. A salesperson for a large national carrier told me about a time where he walked into a shipping office on a sales call and saw a vast collection of die-cast trucks. The usual big carriers were all represented in the collection, but there in the middle of them all, was a 3PL truck complete with company logo on all four sides. The salesman made a point to the traffic manager and informed them of the sobering fun-fact: The 3PL did not have any trucks and actually used his carrier to move many of their shipments.
Fewer assets equal more flexibility
In the uncertain future of logistics, carriers will most likely gravitate toward a less asset-centric operational model. This gives the carrier the most flexibility and allows their service providers to perform at the highest levels as they will have “skin in the game.” Carriers will start transitioning from company owned equipment and employees to utilizing owner-operators who own their own trucks and trailers. Asset-light companies also have fewer company employees, but use self-employed freight agents and contracted owner-operators with their own trucks and trailers to handle the capacity.
Companies that operate as asset-light enjoy driver turnover rates as low as 25%, whereas the rest of the industry is at 97%. I believe that it is because this model has few recruiters, but many retention specialists making sure independent contractors are happy, productive and profitable. This focus on retention ensures longevity and decreases costly turnover. A constant turnover of employees is a drain on a company and contributes negatively to safety, performance and the bottom line. When everyone is happy, productive and profitable, recruiting takes care of itself at no expense – by word of mouth.
Carrier risk reduced
The less asset-centric model allows the broker/carrier the most flexibility to serve its customers. Manufacturing and shipping cycles are very predictable. There are simply times when a carrier needs more trucks on the road and times when they need less. This model shifts that risk to its owner-operator force who can easily park their rig or haul a load for another company until the cycle picks up. The broker/carrier does not incur the cost of having their trucks and trailers sitting unused in a drop yard, all while making payments on them and insuring them.
Furthermore, this model does not require the company to pay for workers compensation, medical insurance or any benefit. It keeps the company lean and nimble, ready to react with lightning speed to any market situation they may encounter. There are no unnecessary company employee positions in this lean model, thus ensuring maximum efficiency and profitability for their contractors and shareholders.
The asset-light model requires much more influential leadership from the company. They do not have full authority over independent contractors, so they must lead them with finesse, not with an iron fist. Some authoritative leaders avoid independent contractors for that reason. What are your thoughts on the asset-light model? Will it be the new standard in the near future of logistics?