transportationreport REGIONAL MOTOR FREIGHT
parties ignore or neglect in their search for spot market
freight they can mark up.
Evan Armstrong, president of Armstrong & Associates, a
West Allis, Wis.-based consultancy that follows the 3PL and
brokerage businesses, said the nature of an intermediary’s
involvement depends both on its level of sophistication,
and the size and complexity of the relationship with the
shipper.
If the intermediary manages a large-scale transportation
network, it will focus on optimizing the shipper’s investment by selecting carriers and modes tailored to the customer’s needs, Armstrong said. Larger 3PLs have invested
heavily in transportation management software to maximize customers’ transportation spend. Many 3PLs run network optimization programs that consolidate LTL shipments into multistop truckloads, an approach that, if used
correctly, can save a shipper as much as 15 percent a year in
freight costs, according to Armstrong. This type of relationship generates “a lot of value” for the customer, he said.
By contrast, in a transaction-based relationship, the bro-
ker or 3PL tries to maximize its gross margin by buying
freight wholesale and then charging retail, according to
Armstrong. “The focus is tactical and the planning horizon
is short,” he said. “Outside of finding its customer [the] car-
rier capacity and resolving any service problems, the broker
is generating little value.”
For a broker or 3PL, having the density is more than half
the battle. Kane Is Able, a Scranton, Pa.-based 3PL, will
arrange for truckload freight for a large customer to move
with multiple LTL consignments in one trailer. For exam-
ple, Kane will manage the haulage of LTL shipments com-
mingled with truckload freight for a big box retailer from
Los Angeles to Chicago. Once the truckload freight is
offloaded, the rig continues on with the LTL shipments.
