[marylandkw]

Originally Posted by LOAD IT

Quito12

You will not become a millionaire with 1 truck, but you can live a comfortable life.

I have been telling people this every chance I get. It is OK to live a comfortable life and NOT be a millionaire.

[GMAN]

Originally Posted by quito12

Thanks as always for your insight GMAN. A quick question because I don't want to stray off topic. What's the difference with being an O/O and having your own authority?

Anyway, I repectfully feel you didn't address the heart of my question. Maybe there is no simple answer, but I don't understand why the Mega carriers haven't put all the thousands of small carriers out of business.

I understand the better service etc, but the fact of the matter is I can't open up a general merchandise store and not make people stand in line forever and treat them good and beat Walmart. In most industries, thoughI admit I haven't studied it, you can't compete with the mega anythings.

Of course there are exceptions. There are mega restaurant companies like Darden which ows Red Lobster and Olive Garden etc and other big companies like Applebees, but there will always be room for local restaurants because that deals with people's tastses etc.

However trucking is getting the frieght to where it's going. So I still wonder why there aren't just a few mega carriers and everyone else works for them like in the package business where there is FedEx, DHL, UPS, and USPS. that's it, there's not thousands of O/O in that business. Well let me qualify that, there are O/O for Fedex etc, but not thousands with their own authority.

Thanks again for any and all insight provided.

The difference between an owner operator and running your own authority is that an owner operator leases his equipment to a carrier and runs under their authority. If you have your own authority, you are a carrier, not an owner operator. Some mistakenly refer to themselves as owner operators with their own authority. In a way, this could be true, but they are actually a carrier, whether they have 1 truck or thousands.

There has been a trend in recent decades for larger carriers to merge into mega carriers. Some of the larger carriers, such as Swift, are run or owned by people who have never sat in a truck. These people are businessmen who have decided to get into the trucking industry. This primarily happened as a result of deregulation. That has brought on a new set of problems, such as finding qualified drivers. Most all of these mega carriers have brokerage departments. The only reason they would have brokerage departments is because they cannot handle the capacity themselves. You may pick up a load from a broker which originated from Schneider Logistics. Landstar hauls some of these loads and also brokers some out to other carriers. Landstar has been moving more toward utilizing broker carriers, their term for carriers who broker freight through them, rather than using BCO's, or those who lease their equipment to them. They are not likely to get away from leasing on owner operators, but will continue to grow using both segments. The same can be said of Schneider and some of the other large carriers. If they could handle the capacity themselves, there would be no need to broker the freight out. It is a situation where they will gobble up the freight and the shipper may not even be aware that it is being brokered out until the carrier shows up to pick up the load. Some brokerage contracts have penalty clauses where a broker will pay a fee if he cannot cover all the freight from a specific shipper. Most freight is not supposed to be double brokered, however there is much of this going on. That is why you will find some freight being offered at such low rates.

I think that there will always be a place for the independent. These mega carriers simply cannot cover everything, and certainly can't offer the level of service. When you are a small operator, you need to find a niche' where you can offer a service that may not be offered by the large carriers. LOAD IT is correct about worrying about the mega carriers. These large carriers may not always exist. They could fail. Just because a company is large, doesn't necessarily mean that it will not fail. Frankly, I think some of them have already failed, but that is for another discussion.

And by the way, there are some independents or those with a single truck, who have their own customers. It is up to you to decide which way you want to run your business. You can use brokers or go out and start making sales calls on shippers. Some may want a larger carrier, others may want to do business with a smaller operator. One thing I have found recently, there are a lot of shippers who are fed up dealing with brokers. Some would much prefer dealing with carrier's directly. Some don't like the brokers taking such a huge piece of the freight rate. I have ran across this on several occasions, just this year.

[geomon]

Gman...why would shippers worry about what the carrier vs broker was making on a shipment? Obviously if they think they can get a lower rate by going direct...that is an instant money saver for them.
Or...
I suppose one instance would be if the shipper paid a good and fair rate and then the 'independant' carrier showed up in an old pos truck held together with bailing wire and a hope. If they knew what they paid the broker and what the carrier is hauling their precious load for....THEN they might care. Otherwise, they agreed to the rate and the next thing they want to hear is that the freight arrived safely and on time.

[LOAD IT]

Originally Posted by geomon

Gman...why would shippers worry about what the carrier vs broker was making on a shipment? Obviously if they think they can get a lower rate by going direct...that is an instant money saver for them.
Or...
I suppose one instance would be if the shipper paid a good and fair rate and then the 'independant' carrier showed up in an old pos truck held together with bailing wire and a hope. If they knew what they paid the broker and what the carrier is hauling their precious load for....THEN they might care. Otherwise, they agreed to the rate and the next thing they want to hear is that the freight arrived safely and on time.

Geomon,

The shipper is usually upset because he agreed to pay a hefty sum 2 days ago and the truck has just arrived because the broker has been trying to peddle the cheap rate for 2 days and the freight has been sitting on the shippers dock, shippers do talk to drivers and drivers do talk to shippers. I tell my drivers not to solicit shippers, thats my job (and not backsoliciting). Numerous times shippers have called me because their broker is not providing enough trucks, I offer my brokerage services and my truck capacity. The age of the truck has nothing to do with it, I run 2 year old trucks and million milers, no shipper ever called and said "Your trucks are nice or your trucks are crap" Also the shipper may not be looking for cheaper, he just wants ontime service.

[yoopr]

This primarily happened as a result of deregulation.

Which is what I said-If you know the Past and why things happen you're able to deal with things in the Future as a O/O

[rank]

The only reason they would have brokerage departments is because they cannot handle the capacity themselves.

I suppose that may be true. But IMO, they're primary concern is to lock up shippers. They know their cost in any given lane, so if they can broker it our below cost they're making even more money than if they pulled the load themselves.

Independants should take those cheap loads and not show up. :twisted:

[GMAN]

Originally Posted by geomon

Gman...why would shippers worry about what the carrier vs broker was making on a shipment? Obviously if they think they can get a lower rate by going direct...that is an instant money saver for them.
Or...
I suppose one instance would be if the shipper paid a good and fair rate and then the 'independant' carrier showed up in an old pos truck held together with bailing wire and a hope. If they knew what they paid the broker and what the carrier is hauling their precious load for....THEN they might care. Otherwise, they agreed to the rate and the next thing they want to hear is that the freight arrived safely and on time.

I think LOAD IT is correct to a point, but I have found that shippers are fed up with paying some brokers a premium price and then finding out that the truck is only getting a small percentage of what he had to pay the broker. Only a few months ago, I had occasion to talk with a shipper who found that he paid a broker, I believe $13,000 to move an over-sized load a short distance. The truck only received something like $5,000. I could be a bit off on my figures, but in any case, there was a huge discrepancy. He felt ripped off as did the carrier. This was a multi-axle truck which required special handling. We talked for a while and he asked if I would be interested in dealing direct with him on some shipments. He said that he preferred dealing direct rather than going through brokers. I have had this scenario happen several times this year. I didn't solicit their business, the approached me.

[Ian Williams]

Originally Posted by quito12

However here is a list of companies by revenue from 2003,

1-United Parcel Service $21,339,874
2-FedEx Ground 3,912,000
3-Schneider National 2,905,000
4-Roadway Express, Inc. 2,844,214
5-Yellow Transportation Inc. 2,788,078
6-FedEx Freight 2,689,000
7-J.B. Hunt Transport, Inc. 2,433,469
8-Swift Transportation Co. 2,397,655
9-Con-Way Trptn. Services 2,107,258
10-Overnite Transportation 1,475,463
11-Ryder Integrated Logistics 1,459,603

This doesn't even come close to the biggest revenue companies overall, as a matter of fact $21 billion would just about to place it around 100.

Today you would have to combine Overnite with UPS & Yellow/Roadway/USF.

Interesting how LTL dominates the list, only 3 of the 9 are truckload.

I don't know what size it is in trucking, but at a certain point you stop gaining economies of scale. The analogy one of my accounting profs. used what that you save a lot by going from ordering by the pallet to a truckload to a rail car, but the second rail car is the same unit price as the first.

While the megacarriers have some economies of scale, they also have some dis-economies of scale in other aspects. How many managers and back office folk does a large operation have? How much do they have to spend on recruiters?

Once an organization grows to a certain it starts to change. People tend to behave differently when they are 3 of 7, Unimatrix Schneider that when they are on a first name basis with the owner. Currently I'm OK with being drone 3 of 4, Outbound Dock, Con-Way Reno. Its not a bad gig but its very different trip than working at a small company.

It seems like Reefer and Dry Van are largely "commodity hell" while flatbed, over-size/weight/dimension, HHG, & Car hauling offer better rates and opportunities for differentiation. I know a few years ago when Swift was on their "growth at any price" they tried to expand into Car Hauling, only to retreat for that segment.

LTL is an entirely separate animal with large barriers to entry. Any yahoo with $40k can go down to a truck dealer and compete in truckload. Building a national LTL pallet or parcel network would require BILLIONS in property, plant & equipment.

Its a hard read, but if you want to understand some of the dynamics of trucking read Sweatshops on Wheels by Michael Belzer

[GMAN]

Ian, I don't know of any barriers that a small operator needs to overcome in order to be competitive and successful. From time to time, I do LTL. I could do LTL exclusively, and I don't have billions of dollars. Yes, the money tends to be better, but there is also more work involved finding the right fit for your freight. You don't need a huge warehouse or logistics setup to make it work. You only need some knowledge of the industry, your capabilities, and a commitment of your time. It can be a challenge. You don't want to take anything that is too cheap. You also don't want to take anything which takes you too far out of route. You can to LTL no matter which segment of the industry you are involved. I have known of van people, flats, steps and reefers who are doing LTL successfully. Some people just don't want to work that hard.

[Ian Williams]

GMAN

Its one thing to run smart and have 2-5 orders on a trailer that drop in the same region.

It yet an another to play "freight tetris" packing a trailer high and tight using load decks and dunnage with 40-70 bills going to different destinations in a region.

There are economies of scope in having a hub and spoke network. You can combine the auto parts from City A and the Ping Pong Balls from City B into one trailer going to City C.

Then there is the parcel side of LTL. UPS and FedEx Ground pack 2000+ parcels on a trailer. At 67 stops per day It would take you about a month to deliver all of them.


Respectfully
Ian