Hybrid Dispatch Service

Thoughts on the success/failure of such an idea and whether there would be an interest in such a service?

See below for the full post and anyone's ideas.

 

I am looking for feedback regarding a dispatch company that is a bit different than what I’ve seen discussed on here previously. It’s a hybrid based on two business models.

First, I understand that there are drivers/ independents who in no way, shape, or form would ever use a dispatch service. I get it and there is no need to explain that. I myself was a driver for 14 years and I totally get the thrill of the chase for a load and rate and being the only one in charge.

But, I do believe that out of the 3.5 million drivers that there are those who have their own authority and just want to drive.

The first business model is:

#1 Run by truckers only. Nothing, no matter what, can beat experience.

#2 Goes head to head with brokers for shippers.

There is an inherent weakness in the brokerage business model and that is the fact that the overwhelming majority build in a 15-20% commission in the rate quoted the shipper. In addition, the carrier never knows the true shipping rate since the broker will try to hide it.

The brokerage business model can be used to the advantage of the carrier using this hybrid type of dispatch service. The first part of the model eliminates the broker’s commission by 5-10%. The dispatch model charges only 10%.

In addition, the shipping rates are not hidden. The carrier knows the base rate.

Add on top of this that the shipper will also be paying a lower rate and it’s a win-win for both carrier and shipper.

For example, a broker creates a quote for a shipper and comes to a base price of $3,000 for a 1000 mile run. They then add in their commission of 20%. Final quote to the shipper is $3,600. They offer it on a load board or to one of their contracted carriers at $1,800 and settle on a final payment to the carrier of $2,200.

Using the business model I have in mind the payment to the carrier increases along with savings to the shipper. With a base price of $3,000 at a 10% commission the final quote would be $3,300. A savings of $300 for the shipper. The payout to the carrier would be $3,000. An increase in revenue of $800 to the carrier.

The argument may be made that this is just brokering by another name. Not true, since the dispatcher is working directly for the carrier under their authority.

The next argument may be made that a broker has access to more resources (carriers). Possibly true, but what if you are not looking to be the biggest on the block. Of the 1.2 million trucking companies in the United States there are 90% that have 6 power units or less.

This first model is looking for contracts.


The second business model is of course related to load boards and dealing with brokerages.

Again, I understand the independents who will never use such a service. Got it.

But, there are those who will and the advantage to them is:

#1 The use of another driver’s knowledge of how load boards, lanes, and timing work.
#2 They get to focus on what they do best and what they want to do which is drive, take care of the truck, sleep, shower, eat, catch up on the log book, load, unload, and get home.
#3 They get to have a full time dispatcher looking for the best load based on the carrier’s requirements while they drive.
#4 Not everyone is a good negotiator or doesn’t like to negotiate. A dispatcher who has been hired for their experience at negotiation has done this over and over.

Critics would state that the 10% cost isn’t worth it. But, with no downtime looking for loads there is an increase in miles driven. With a decrease in paperwork, there is time saved. It should pay for itself with less work

In addition, an experienced negotiator would increase revenues based on their skill.

Thoughts on the success/failure of such an idea and whether there would be an interest in such a service?

 

Thank goodness. The way things are can be crazy. The business model proposed eliminates the uselessness of a broker. A carrier can increase their revenue by going direct and showing the shipper what a waste the broker's services are or using the dispatcher to increase revenue via their services via increased revenue and drive time and wasted downtime.

 

There's a better way.

 

Thoughts on the success/failure of such an idea and whether there would be an interest in such a service?

I am looking for feedback regarding a dispatch company that is a bit different than what I’ve seen discussed on here previously. It’s a hybrid based on two business models.

First, I understand that there are drivers/ independents who in no way, shape, or form would I ever use a dispatch service. I get it and there is no need to explain that. I myself was a driver for 14 years and I totally get the thrill of the chase for a load and rate and being the only one in charge.

But, I do believe that out of the 3.5 million drivers that there are those who have their own authority and just want to drive.

The first business model for a company is:

#1 Run by truckers only. Nothing, no matter what, can beat experience.

#2 Goes head to head with brokers for shippers.

There is an inherent weakness in the brokerage business model and that is the fact that the overwhelming majority of brokers build in a 15-20% commission in the rate quoted the shipper. In addition, the carrier never knows the true shipping rate since the broker will try to hide it.

The brokerage business model can be used to the advantage of the carrier using this hybrid type of dispatch service. The first part of the model eliminates the broker’s commission by 5-10%. The dispatch model charges only 10%.

In addition, the shipping rates are not hidden. The carrier knows the base rate.

Add on top of this that the shipper will also be paying a lower rate and it’s a win-win for both carrier and shipper.

For example, a broker creates a quote for a shipper and comes to a base price of $3,000 for a 1000 mile run. They then add in their commission of 20%. Final quote to the shipper is $3,600. They offer it on a load board or to one of their contracted carriers at $1,800 and settle on a final payment to the carrier of $2,200.

Using the business model of a dispatch service the payment to the carrier increases along with savings to the shipper. With a base price of $3,000 at a 10% commission the final quote would be $3,300. A savings of $300 for the shipper. The payout to the carrier would be $3,000. An increase in revenue of $800 to the carrier.

The argument may be made that this is just brokering by another name. Not true, since the dispatcher is working directly for the carrier under their authority.

The next argument may be made that a broker has access to more resources (carriers). Possibly true, but what if you are not looking to be the biggest on the block. Of the 1.2 million trucking companies in the United States there are 90% that have 6 power units or less.

This first model is looking for contracts.


The second business model is of course related to load boards and dealing with brokerages.

Again, I understand the independents who will never use such a service. Got it.

But, there are those who will and the advantage to them is:

#1 The use of another driver’s knowledge of how load boards, lanes, and timing work.
#2 They get to focus on what they do best and what they want to do which is drive, take care of the truck, sleep, shower, eat, catch up on the log book, load, unload, and get home.
#3 They get to have a full time dispatcher looking for the best load based on the carrier’s requirements while they drive.
#4 Not everyone is a good negotiator or doesn’t like to negotiate. A dispatcher who has been hired for their experience at negotiation has done this over and over.

Critics would state that the 10% cost isn’t worth it. But, with no downtime looking for loads there is an increase in miles driven. With a decrease in paperwork, there is time saved. It should pay for itself with less work

In addition, an experienced negotiator would increase revenues based on their skill.

Thoughts on the success/failure of such an idea and whether there would be an interest in such a service?

 

DLFederal

I really appreciate a well thought out response. I don't take it personal at all. I really like a lot of your ideas. Here's to some of them:

This is true, but how often does the carrier know the price paid by the shipper when it's brokered?

ABSOLUTELY! How can we speed this up. Or more importantly, how can we become a part of what will make them obsolete? Look at NASDAQ. Better yet, we need a Brad Katsuyama to help set up a Trucker's IEX.

This is what a previous boss of mine did at Comex in the copper pit at WTC4. But, how would you break the stranglehold that the largest brokers have on shippers. A shipper would prefer a contract rate set for a year or more (futures) as opposed to the spot market. Or is the idea for the spot market only or for both. Hmm...could a futures market be created for shippers and then the contracts traded?

I'm going to skip the experience part for now. I understand your point though.

Housing comes to mind.

On this one I will make the argument that brokering is dependent on those authority you are working under. If I am working as an employee of a carrier under their authority, then I am doing the job they have hired me to do. Whether that be looking for shippers, finding loads, booking loads, it is a part of my job description. Maybe using the title "dispatcher" was incorrect in the semantics department. As a broker, I am working under a broker's authority and am not working exclusively for a specific carrier.


All in all I like where you're coming from and would like to hear more.

Thanks

 

Rollin

It's a pleasure to be able to respond to you. Before I made my first post I read quite a few of yours and have really liked them.

As I responded to DLFederal, the original post really didn't focus on experience. It was just mentioned as part of a business model that would hire experienced truckers. This was made a part of the business model for two reasons. First, as a trucker myself, I much prefer to deal with current or former truckers since there is a mutual level of understanding. Second, and still somewhat in the same vein, there are many, many people who have been hired by brokers who should not touch a phone.

True experience, I went to the local offices of both CH Robinson and PLS. At PLS there were about 100 college age people sitting at tables staring blankly at computer screens and doing nothing. In their shorts and flip flops while texting on their smartphones was pretty much par for the course. If their rate of pay is based on commission then the majority will soon be unemployed. At CH the scene was pretty much the same. I'm not knocking their work habits, mode of dress, or anything else. Just telling it like it is. But, when on the road and having issues, this is the last type of person I want to be dealing with.

As an aside, I have a friend who got hired by PLS in another of their offices and the first thing out of their mouth was how they were trained to lie. Such a shame.

Finally

Low risk and high reward is an art form and worth the bother. Anything else would be gambling?

Thanks again and like I said before, I really enjoy reading your posts.