Less-Than-Truckload US Market: Agency Model
Former Senior VP at Yellow
inpractise.com/articles/less-than-truckload-us-market-understanding-the-agent-model
Former Senior VP at Yellow
The expert is a seasoned executive with over 40 years of experience in the transport and logistics industry, primarily focusing on Less than Truckload (LTL) operations. He spent his extensive career at Yellow Corp, holding multiple roles, with his last position being Senior Vice President of 3PL Solutions. His expertise lies in operations management, network building, and understanding the competitive landscape.
Interview Transcript
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The overarching question that I would like to break down with you during this interview is how is an LTL network built and scaled, from scratch
The easiest way to start is generally to buy an existing company. The cost of capital to start an LTL company to become the size of Yellow or Old Dominion is significant. The amount required to have operations and terminal facilities like theirs is substantial. It's very difficult to build truck terminals because municipalities don't want them. So, you have to buy existing ones.
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The overarching question that I would like to break down with you during this interview is how is an LTL network built and scaled, from scratch
If you start to drop freight into everyone's network at origin, it becomes difficult to make any money because the only part you've done is the origin portion, which will be a small portion of the revenue. Let's say you got a shipment for $100, for example. Most arrangements are built on a D83 split. It's a traditional splitting of the revenue based on how far the freight has traveled. So if the shipment was going from Los Angeles to Boston and I gave you the shipment in Los Angeles, I would only get a small portion of that $100 because I only handled a small part of the line haul of the movement. If I took it and gave it to you all the way in Boston for you to deliver it, I would get a bigger portion of that revenue. Therefore, how far you move it impacts how much of the revenue you're entitled to receive in a traditional agent type network.
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Why is it challenging to operate like Custom Companies, without owning trucks or facilities, and just aggregate orders and dispatch them with LTL carriers?
They offer multiple carrier options at better prices than you could get directly from the carrier due to their larger volume. You can choose which carrier you want to use for each lane. You just come to my platform, shop, and I'll handle your UPS business and your LTL business. You come to me for customer service and any claims or issues. I'll bill you what I bought it for plus a markup, which is generally 20% to 30%.
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