December 1, 2022

Profitability in challenging times is possible for innovative 3PLs


Will freight have a soft start to the new year?

With freight facing bearish projections for the first half of 2023, third-party logistics providers (3PLs) of all sizes are bracing for stagnation.

“We’re seeing smaller trucking companies start to go out of business, even closing their doors and moving into different lines of business outside of logistics altogether,” said Graham Gonzales, vice president, strategic accounts, at Reliance Partners, noting that economic recessions are first visible in the logistics industry.

Gonzales joined FreightWaves’ WHAT THE TRUCK?!? to discuss the ways 3PLs can shine through an economic downturn that hopefully don’t include layoffs.

“Keeping head count where it’s at, even growing in hard economic times is something that we see of the most innovative 3PLs,” Gonzales said.

“The more innovative [3PLs] are able to position themselves in such a way that they’re creating an additional trust for their shipper clients,” Gonzales pointed out. “They’re creating true transparency with their motor carriers, even taking losses on loads so that they can keep lanes open and keep partnerships with those key motor carriers.”

In regard to costs, companies are typically more vigilant about their expenses during recessionary times, but Gonzales warns against putting insurance on the chopping block.

Though a typical freight broker may never have to file something as serious as an auto liability fatality claim, he explains that having such policies in place can be the safety net preventing you from going out of business when catastrophe strikes.

“I don’t think cutting actual coverage out or going with poorly rated insurance markets or even those with poor reputations is going to be a solid move for any company that is trying to sustain themselves long term through a trying time,” Gonzales said.

He added that going the cheap route may not be smart either. Remember that affordable doesn’t always mean adequate. Gonzales said to make sure that your agent isn’t settling for a lesser policy that can leave you hanging when a claim is filed.

Gonzales said that Reliance Partners opens new doors for its freight broker clients by providing insurance offerings that they can provide to their shippers on high-value cargo as well as coverage necessary for leasing their own trailers.

“[Reliance Partners] has created an insurance product that allows 3PLs who have no motor carrier authority or no assets to basically lease as many trailers as they can get their hands on and expand their own capacity so that they’re not having to lean on risky motor carriers.”

This gives brokerages confidence to cover higher-value commodities for their most important shipper clients without hesitation.

“If they can quickly step up and get that load covered, they’ve created a trust with that shipper that could lead to more high-value loads and more strange commodities — some of the things that they’re not typically comfortable with brokering.”