Economies of Scale among Mega Carriers

The reason is because big carriers low ball the rates to get the freight and work it volume. I thinks a crap business model especially when times get a little tight. That's when you see them start going belly up quick or getting bought out.

 

Yes, there are economies of scale, but on the other hand, they hire drivers whose only qualification is a heartbeat. That winds up costing them bigly!

 

no it doesn't.

Drivers really come out as a zero sum gain for them.

They can provide themselves an unlimited source of labor while making nothing on the schooling of the driver, all they need are applicants there and they accept what meets their low standards.

Hell McDonald's has better hiring standards.

Many don't see how it works because they are ... drivers. I and others see there are a lot of causality that have flooded over into the entire industry to cause all of depressed rates, high failure rates, etc ... which is why it is why I talk about a real licensing system and cutting the mega's legs off by getting this a skill trade.

 

Some megas will operate at a loss even just to nudge a competitor out of the customer business. Then over time they begin raising prices but by then they hope to have their tentacles so tightly wrapped around the business that they can’t be gotten rid of.

There are some big companies with several hundred trucks still being ran as a small profitable fleet but it seems they are closely held or get bought for huge money.

As far as scale I think it’s all relevant to your situation. I decided to increase my scale a little going into this bad time but were talking going 8 trucks to 10 trucks. lol. I knew margins would get squeezed but I still have office staff, a building, a yard, etc. When it goes back good I’ll be in a position to capitalize. I did the same thing through 2015 going from like 4 trucks to 6 or 7 trucks. It’s sort of the opposite then most would do but I feel like bad times you have to invest, and good times you bank and stack your money up for the next bad time.

Edit: Even if they have 50 trucks operating at a loss at one customer, as a whole that’s a drop in the bucket fleet wide to root out a smaller carrier who can’t compete. That is one advantage to their scale.

 

Hiring standards? What standards?

There was an article just yesterday stating many carriers are now hiring, or considering felons.

Due to the driver shortage

 

Just out of curiosity, how many of you talking about the mega’s rates come from on of their accounting or sales departments? In 28 years being in this industry I have never seen their rates made public.

 

If I worked for a owner of say 4 trucks roaming the east coast each week and home on weekends. His problems are relatively minor. He's looking at about 10,000 dollars cash for that week. 25% go to drivers as payroll. The rest go into his company. Very little into his household. If he needed a 30,000 dollar repair bill immediately there is a problem that might put him out of business.

Now if JB hunt running 12000 trucks all over the USA, a 30,000 dollar engine problem is minor. Literally $2.50 from each truck's earnings that day to pay the 30,000 dollar bill. The fuel bill alone is in the millions. If all 12K trucks bought 300 gallons today, that's a 9 million dollar bill to pay immediately.

When you get big enough to be Mr Big able to write 9 millions for the gas bill today without borrowing anything then you are not going to be concerned with economies of scale anymore. You will have a office staff to worry about that today while you concentrate on your children's ball game tonight or something.

 

What are you calling a real licensing system?