Carriers seeking to grow their network of trucks and terminals have two basic options to do so:
1. They can purchase or own them.
2. They can partner with companies that own them.
This article will focus on the latter. In it you will learn the basic differences between two main ways carriers partner with other companies to grow their networks:
Asset Light Partners
Indirect Carrier Partners
Asset Light Partner Relationships
In these relationships the primary LTL carrier wishes to sell their brand and service in a specific market. To do this they need terminals, trucks, employees, etc. (infrastructure) to do this. In an asset light relationship the primary LTL carrier will lease or contract agents who have these assets in the market they are targeting.
For example… carrier A is a large carrier with a big terminal in Atlanta, GA. The wish to offer service from Jacksonville, FL to the areas across the country they service out of Altanta. Currently they do not have enough business in Jacksonville to merit purchasing a terminal. To move into this market they make and agreement with smaller carrier B, who operates locally in Jacksonville, to become their agent. They lease some space in their warehouse and have carrier B perform pickups for them in that city. When carrier B picks up they do so under the brand name of carrier A and assign a tracking number for carrier A.
With such a relationship carrier A is able to enter into a new market at a lower fixed cost or completely variable cost. This enables them to offer competitive pricing and service to their existing customer base. It also gives them a service with which they can attract new customers.
In these relationships it is most common for carrier B to act as the silent partner. To the customer carrier A is the primary carrier and all liabilities for the shipment fall onto them as described in their carrier agreement with the customer. Likewise it is very common for carrier A to not mention the name of their agent carrier B or in some cases not mention them at all. The reason being they want the customer to see the service as an asset based service that they are providing on their own.
Indirect Carrier Partner Relationships
When a carrier wishes to expand it’s reach and market offering a second option is to establish indirect or “interline” carrier relationships. These relationships are more like joint ventures and are often reciprocal in nature.
For example, both carrier A and carrier B are regional carriers. They would like to offer service to their customers in the other carrier’s respective region. Instead of purchasing assets in the area or utilizing the asset light model, the strike up a deal with each other to offer an indirect or interline service. In this service they will offer the service to their customers and where their network ends, they hand off the shipment to the interline partner.
In these relationships it is most common for carrier A and B to offer the service with transparency to their customers. Sometimes it will be offered simply as an indirect service or as part of an “alliance” network. In these services all freight charges are payable to the originating carrier. If you have special services (limited access, extreme length, etc.) it is a good idea to check with both carriers and/or clarify via a documented rate quote with carrier A how these services will be handled and what they will cost.
Transportation Executive with experience in developing processes and controls for early stage start up companies. Specialties include: Sales, Marketing, Transportation, Trucking, Brokerage, Project Transport and Rail Operations.,Organizational Design, Process Development, Accounts Receivable Management, Leadership, and Business Start-ups.
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