About the Transport Carrier Directory

Introduction:

The Motor Carrier Act of 1980 started the financial demise of many independent transport carriers. The Act was touted by the politicians and economists as a great benefit for consumers by reducing freight costs through competition and less government rules and regulations for the trucking industry. 

As predicted deregulation has created price wars, cut throat discounting and the destruction of many large and small transport carriers.  Deregulation has been based on economic theory.  With no empirical evidence to demonstrate that deregulation in its present form has benefited consumers or the trucking industry.  

Lets examine the results for transport carriers.  In 1979 before deregulation, 186 companies went out of business.  Eleven years after deregulation the number soared to over 1,500.  Between 1990 and 2000 the number reached over 11,000.  During 2008 hundreds more will fail because of accelerating diesel fuel prices and transporting costs. 

During this deregulation period a significant number of transport carriers have entered the industry.  A substantial number have no financial knowledge of what the current transportation costs are let alone the revenue requirements needed to reach an adequate return on their invested capital.  With thousands of shippers and intermediaries to buy freight movements from, a Commercial Drivers License, a truck, insurance and 48 state authorities it is easy to enter the transporting industry. 

Exacerbating the problem since deregulation Title 49 federal law issues certificates of authority to two different types of carriers: non-asset based carriers (generally called intermediaries) and asset based transport carriers.  

The non asset based carriers or intermediaries are classified as freight brokers, logisticals companies and enterprises that operate as follows:

1.  They are legal agents for the shipper. They represent lower shipping rates to the shipper and also generally purport to also represent the best interest of the transport carrier.  They have no dual agency disclosure requirements as in a real estate property transaction and have little or no regard for whether the shipper receives the lowest freight costs or whether the transport carrier receives the current cost of transportation with an adequate return on invested capital.  They bid, buy and bill freight movements from shippers.  Using load boards, phone, faxes and e-mails they sell the freight movement to the lowest transport carrier bidder and keep the difference as their freight margin or commission.

2.  While required by Title 49 federal law to register as a motor carrier they contract for all freight transporting with asset based carriers.  Their balance sheet carries few tractors and trailers.  Their most significant assets are shipper freight bill accounts receivable.  Their most significant liability is for the contracted purchase of transportation from asset based carriers that actually move the freight. 

3.  Their management strategy is simple: "bid, sell and control the freight movement, then contract for the freight movement with a transport carrier and keep the difference."    

That yield after purchased transporting costs, has steadily increased since deregulation.  From 8 to 10 cents in the 90s' to 12 to 18 cents since year 2000 and going up. For some non-asset based carriers it can reach 30%.

Asset Based Carriers get job done.

It is this control of the freight movement and this increasing yield and freight margin that has been the genesis to the creation of the Transport Carrier Directory.  Increased freight yields have been taken from both shipper and the asset based transport carrier who has been taking the greatest risk.  Return on invested capital has steadily decrease for the asset based carriers while the non asset based have steadily increased their return on invested capital.  Increasing freight margins of the intermediaries has been taken from the profits of the shippers and the asset based transport carriers. 

Asset based transport carriers get the real job done.  They have the  largest investment in drivers, tractors and trailers.  They also carry a large investment in freight bill receivables.  Many times the accounts receivables are due from the intermediaries that have sold the freight movement rights to them.  They still bear most of the burden of remaining government compliance regulations administered by the Federal Motor Carriers Safety Administration.

 Rarely today do they get a high return on their investment.  The average asset based transport carriers that buy intermediary freight movements do not get current market cost for transporting freight.  Market costs which included under regulation a reasonable profit as a return on invested capital.

Intermediaries argue they buy and sell shipper freight at "current market price."  If this argument is true the intermediaries cost of purchased transportation must then equal to the transport carrier's gross revenue.  It should represent the current market cost of transportation to include a fair return on invested capital."  It currently does not. 

Before deregulation transportation was considered a utility.  A reasonable return on investment was included as part of the transportation cost.  State Public Utilities Commissions still use this same approach in granting rate increases today to electric and gas utilities and some telecommunications companies.

Through the growth of non-asset based intermediaries transport carriers are currently not getting sufficient revenue to cover their current market cost of transportation to include a fair and reasonable after tax return on their invested capital.  While transport carriers are numerous, fragmented competitive, highly independent, the Transport Carrier Listed on our directory are dedicated to receiving the current cost of transportation to include a fair and reasonable return on invested capital.  These two objectives are the sole missions of the National Network of Transport Carriers.

 To accomplish this mission the National Network of Transport Carriers is building a federation freight management, internet and information systems that assist shippers with competitive shipping costs and allow transport carriers to strive to recover their current market cost of transportation to include a fair return on invested capital.