Rise of Broker/3PL Era Is Directly Tied to Lack of Imagination
Recently, when I realized the extent of a certain new business reality, it was quite the eye-opener.
While interviewing a highly qualified candidate for our newly created sales-director position at Zip Xpress Inc., in Holland, Michigan, we were deep into discussion about revenue and customers and more.
The candidate was from a very large and well-established Midwestern LTL general commodities carrier that has been in business for 50-plus years. The company has a great reputation and a full sales staff of 75 reps. And their biggest customer, in the entire company? A 3PL broker!
Not a big manufacturer somewhere nearby, but a middle-man broker doing all the deals with the shippers.
In this case, the biggest “customer” was CH Robinson.
Nothing against CHR, mind you, but I was in total shock to realize that this well-established company had so little in the way of direct customers they could call their own. This didn’t happen overnight; that carrier eased its way into a situation where customer service no longer involves its own customers.
After that revealing nugget of information, I pondered the situation for quite a while. Inevitably, it brought me to thoughts of how our industry has massively shifted focus in the past 15 years. To be more precise on the time frame, it was right after the September 11 terror attacks and the recession that soon followed. In an industry-wide shift that felt almost “overnight” for some of us, shippers somehow bought into thinking they’d get better pricing and service from 3PL/broker entities than traditional, full-service, asset-based carriers.
But how could this be true, given the deep resources and experience of mega-carriers such as FedEx, UPS, YRC, and XPO Logistics? What is it that a 3PL has that a company with its own fleet doesn’t?
A sales person from an asset-based carrier almost always has to call on a back-room non-decision-maker, back in the shipping department. But the brokers get to call on the CFOs? The controllers, the presidents, the CEOs? Why do they get in the front door and get to pitch the real decision makers?
Looking Back for Answers
Let’s look for a moment at where this industry has come from.
I was a young trainee at Roadway Express, in Taylor, near Detroit, in 1975. It was a very large facility with lots of business coming and going day by day. Roadway was one of the most respected LTL carriers in the business, with 100% direct billing to their customers. Last year I had the opportunity to revisit my old training grounds, and it was like stepping back in time, meaning that nothing had changed except the name was YRC instead of Roadway. Same colors, same hub/spoke business model, same tried-and-true way of doing business.
This is how it is with all of North America’s largest LTL carriers … including very little flexibility when it comes to serving the general shipping public.
That was, and is, a big part of the “problem” of asset-based carriers.
You want a pick-up after five? Sorry.
You need to move a half-trailer of blanket-wrap office furniture? You’ll have to call our special commodities division when they’re open. Or we can just charge you Truck Load; we can do that as a “favor.”
Want an early pick-up? Sorry.
Door-to-door delivery? Nope.
I’m sure you’re getting the picture by now. These slow-to-adapt mega carriers have been standing knee-deep in concrete too long. They’ve failed to arm themselves with laser-focused customer-service options. They’ve ignored offering the flexibilities that today’s customers need.
Guess Who Filled the Vacuum
In the cruel reality of business, you snooze … you pay the consequences.
Many mega-carrier business models still, today, are outdated, self-serving, and ridiculously rigid.
And thus … bring on the brokers and 3PL companies. They have the answers to many of these tricky, niche, detailed customer needs of contemporary commerce. These newer firms have worked harder, they’ve been more visionary, more creative and, in many customers’ eyes, more trusted.
This business reality is not going away; it’s basically unstoppable, which should be a wake-up call to our industry. The stagnation that exists among big and moderately big transportation companies reminds me of General Motors and the rest of the carmakers during that same time period of the mid-1970s. That was when Toyota and other foreign makers entered the domestic market in earnest. Our Big Three, of course, laughed heartily and derided their cars as nothing but big lawn mowers and rice burners.
Our automakers just went about their business, thinking that the newcomers would never viable competitors. After all, the Big Three firms were making huge profits while their vehicles prematurely rusted and broke down … which just meant more repair profits or more new-car sales, they figured. What a gravy train.
All the while, as our high-paid executives did their “same old, same old,” the Japanese were building better cars with better warranties, better service, and even some style that challenged Detroit designers. Today, of course, General Motors, the former world-class gold standard of car manufacturers, is now in second place to Toyota as the largest car maker worldwide.
Happening In Our Sector, Too
This is the scenario in the transportation world, too, where there may be no more direct salespeople someday and all of the business for carriers will have to flow through a third party. Maybe this trend is unstoppable.
We, the asset-based carriers who must tend to our power units, our trailers, and our brick and mortar, have only ourselves to blame for our lack of foresight and flexibility. Sorry, but the “dinosaur” label fits.
We need a major overhaul to get the shipping public back on our side, and with a whole lot more options than is currently being offered.
If brokers can find these options for their shipper clients, then we certainly should be able to as well.
Our companies, Zip Xpress and Green Transportation, are small businesses yet we offer many of the options that are demanded today by customer clients. Fully 98% of our $35 million in revenue is customer-direct. You read that right.
How could this be? Because we are modern in outlook; we are visionaries in this business of moving product. We’re easy to use, with many, many options that work for customers … not just for our convenience.
We understand what our customers want and need. We make pick-ups free of charge after 5 p.m. We pick up early when our customers say “Now!”
What if a customer calls with that half load of blanket wrap that I mentioned earlier? Their needs are handled with one phone call or email, with complete confidence that we’ll get their job done.
Come on, FedEx, UPS, YRC, XPO … get back in the game and start being a truly full-service carrier.
Make your company easy to use, with all the options that contemporary commerce requires. Just do it … or just watch your own version of a General Motors decline.
