Many big shippers have so-called contracts with “core carriers”. Many of these are loosely structured, promising a limited volume of loads in exchange for a rate structure. Even carrier contracts that are more stringent may be on the endangered list. Here is why:
- The vast majority of trucks on the road belong to small fleets with less than 10 power units
- Freight brokers, brokerage arms of carriers, and technology plays (e.g., Uber for trucks) are able to connect transportation buyers with these small fleets
I see a real downside: big brokers should be able to game the system because they have a lot of data. They can see what is coming and going from each market. With this data, a big broker, for example, should be able to relatively accurately predict short-term shortages and gluts. By pre-buying or proactively selling, these brokers can generate bigger profits. What is a shipper to do? Firstly this is speculation on my part – but working with some AI experts in the hedge fund business makes me feel confident…if I can work out how to do it, I can bet sophisticated brokers have too. Since knowledge is power, I’d suggest large shippers band together to share data in real-time and similarly predict the market, or you can simply pay more.
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