Updated March 2022
Finding an organization that can help your company take control of its shipping can seem overwhelming. The market is flooded with freight brokerages and other providers that claim to have a handle on an increasingly complex transportation market. In reality, capabilities can be vastly different from one transportation company to the next. Many companies describe themselves as third-party logistics (3PL) providers, for example, but that label can mean different things to different people.
Fortunately, you can ask a few key questions to identify a good transportation company.
What should you ask a transportation company?
- How long have you been in business?
- How well is your company doing?
- What is your capacity?
- How do you treat your customers?
- How do you treat your carriers?
- Can you explain your technology?
- When you say "3PL," what do you mean?
- Tell me about your people.
How long have you been in business?
Unfortunately, the freight brokerage industry has had its share of fly-by-night operations. Some brokers are infamous for paying their carriers late, or not at all. The good news is that these kinds of companies do not stay in business very long.
When talking with a freight brokerage or logistics company, ask how long the company has been around. The Internet can also give you information about a company’s longevity, as well as any lawsuits, liens or customer complaints filed against them.
If a freight brokerage has been operating for a decade or longer, that is a good indication that it is a viable business. If the company is a start-up with very little history, be wary.
How well is your company doing?
You want to build a long-term partnership with a transportation provider that has the resources to handle your business. Do not hesitate to ask about that company’s financial health. In fact, dig for as much information as you can. How much did the company make in 2014 revenue? What was its top-line growth, year to year? How many employees does it have, and how has headcount changed over the years?
The third-party logistics industry has grown steadily as supply chains become more complex and shippers outsource more of their transportation. A recent report from Grand View Research Inc. projects that the global 3PL market will grow from over $700 billion in 2017 to $1.24 trillion by the year 2025. Ask the leaders of each transportation company you speak with what their projections are for the next three years. If their outlook is not as optimistic as the expected industry average, that could be a warning sign.
What is your capacity?
Due to a nationwide shortage of truck drivers, finding the right amount of trucking capacity is a big concern for shippers. Freight brokerages know this. Most of them promise to find clients the right trucks and equipment at reasonable rates. The amount of capacity these companies can actually provide, however, can vary widely.
Because capacity is such a big issue today, you should work with a brokerage or logistics provider that has a network of thousands of carriers. Equally important are the types of carriers in that network. Does the brokerage offer capacity in all freight modes and in all regions of the country? Can the company book freight with the railroads when long-haul trucking is too expensive or inefficient? What about the quality of the carrier network? You’ll want a transportation partner that works with trucking companies that are experienced, well-insured and have strong safety records. Finally, a transportation company that regularly audits carrier performance and safety can be an added benefit to your shipping.
How do you treat your customers?
The best transportation providers have such a high level of customer service, they seem like an extension of a shipper’s operations. Accessibility and ease are important factors. Look for a company that can be reached 24/7, including on holidays and weekends. It also helps to understand how the company structures its customer support. Having a single point-of-contact who can answer questions and make quick decisions can save you time and headaches in managing your freight.
If a transportation company has been in business for many years, ask about that company’s customer retention rate. Are there any clients who have stayed with the company throughout its history? Again, you want a transportation partner that knows how to meet expectations and manage long-term customer relationships.
How do you treat your carriers?
The best transportation companies offer more than just capacity across trucks and equipment. They also build long-term, trusting relationships with some of the top carriers in the industry.
Before you start to work with a freight brokerage or logistics company, ask how many days it takes the company to pay carriers after a load is delivered. Brokerages that pay trucking companies on time and help them eliminate costly deadhead miles earn loyalty from those carriers. That loyalty can benefit shippers in many ways. Brokers and carriers that work closely together can better anticipate freight needs from their customers. That leads to service that is quicker and more seamless, and results in fewer damaged deliveries.
Can you explain your technology?
A transportation company’s software is instrumental in how the company helps you manage and gain visibility to your freight. This is especially true if your company is exploring transportation management software (TMS), which offers a more comprehensive approach to managing a supply chain.
Take some time to ask transportation companies to walk you thought how their software works. If they can’t explain their technology in a way that is easy for you to understand, they may not understand the technology very well themselves.
Some transportation companies develop their software in-house, but most partner with an outside technology company. If the company you are talking with offers a licensed TMS solution, ask for the brand name of the software and do some research on how it performs against similar products.
When you say, “3PL,” what do you mean?
Even if you know exactly what third-party logistics means, it helps to know what it means to your potential transportation partner. A quick scan of different 3PL company websites will show that many of them define 3PL differently, with different sets of services. When talking with a company that describes itself as a 3PL, ask about the services that make up the 3PL offering. Ask to see a few case studies of how those services have helped existing customers manage transportation and control costs.
Finally, make sure the transportation company offers a depth of experience in the services that are most critical to your company’s shipping needs. For example, a 3PL’s experience in import/export or warehousing may be irrelevant to your company’s transportation. However, the way the company handles project management could be critical to your business.
Tell me about your people.
This may be the most important question of all. Ultimately, what differentiates a quality transportation company from competitors is the quality of its personnel. Does the company have the right mix of young, energetic brokers and seasoned logistics professionals to manage your company’s freight? Does the company have a reputation for retaining employees and bringing in qualified specialists to continuously improve its services?
You want to choose a transportation company that will grow into a long-term business partner. A company that hires the best people and rewards them stands an excellent chance of meeting and even exceeding your expectations.