Analyst Insight: The freight market is in a state of flux. Convoy closes shop. Yellow Freight files for bankruptcy. Fuel prices fluctuate. Supply chain disruptions from natural disasters, geopolitical issues and weather have affected the demand for freight services. Changes in regulations, such as new emissions standards, safety regulations, or trade policies, have impacted freight carriers' cost structure and operations, which can lead to changes in freight rates. Now is a complex time for shippers. 

The sudden closure of an LTL/TL carrier can lead to immediate disruptions in shipping operations, affecting the movement of goods and potentially causing delays in delivery. The sudden increase in demand for alternative carriers may lead to price volatility in the transportation market. Shippers may face higher rates due to increased competition for available capacity. 

What Can a Shipper Do?

First, identify an alternative carrier, which includes vetting the carrier to ensure they have a good reputation in the marketplace, and performance KPIs. Verify that the carrier holds the necessary licenses and certifications to operate legally. Review the carrier's safety record to gain insights into their safety performance. Confirm that the carrier has adequate insurance coverage, including liability and cargo insurance, to protect against losses or damages during transit. Evaluate the carrier's financial stability, technology stack, and maintenance practices. A carrier with advanced tracking systems can provide real-time shipment updates, enhancing customer service. Well-maintained equipment is less likely to break down, leading to fewer disruptions. 

Shippers should expand their carrier network and diversify carrier partnerships, not just rely on a single provider. Reach out to other carriers the shipper has worked with in the past or explore new carriers by asking industry contacts and partners for references. Shippers can also check DAT, Loadboards and Carrier 411 services to find new carriers. Regularly review carriers' financial stability and reputation before entering into long-term agreements. 

Evaluate the existing contracts with defunct carriers to understand the terms and conditions, especially those related to termination or service disruptions. The contract may include provisions for financial penalties or damages that the carrier must pay to the shipper in the event of a breach. Shippers may have to take legal action to recover financial losses. 

Notify customers to inform them of the issue with the carrier and their shipment status. Once you have secured another carrier, get updated delivery information and let the customer know an ETA. The quicker an alternative carrier is secured, the less likely the customer's order will be delayed, avoiding a strain on the customer relationship. Open and transparent communication is essential to manage expectations, and minimize the impact on customer satisfaction. 

To mitigate the challenges caused by the loss of a carrier, shippers should have contingency plans in place, maintain flexibility in their logistics strategies, and regularly assess their carrier partners' financial stability and performance. Using technology like risk management simulation software, shippers can ask, “If new carrier X enters my current carrier mix, what will it do to my total transportation costs?” These tools will help shippers find the best carrier mix for optimal performance. 

Outlook: During the pandemic, when freight volumes were down, many of the biggest LTL freight carriers fine-tuned their operations for the future. They reduced their equipment assets while adding technology to automate manual processes and to better match freight with demand. By right-sizing their organization, LTL freight carriers have been able to keep healthy margins. Shippers can turn to 3PLs to help them find alternative carriers for their freight operations. 

Resource Link:

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